The Role of Symmetry between the Revenue and the Expenditure Side of the Government Budget in the Debate about the Potential Negative Effects of Tax Competition |
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Authors: | Anton Jevcak |
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Institution: | (1) University of Dortmund, LS ?ffentliche Finanzen, Vogelpothsweg 87, 44221, Dortmund, Germany |
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Abstract: | The effects of capital tax competition are reconsidered in this paper incorporating the argument that the expenditure structure
of public budget should reflect its revenue structure. The paper offers a small open economy model where capital and labour
tax revenues are used exclusively on the provision of public inputs. It is shown that if the revenue side of the government
budget exactly matches the expenditure side that is if industrial public goods are financed by both private production factors
with the weights reflecting the contributions of public inputs to the private factor productivity then public inputs are provided
optimally even in the presence of tax competition. |
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Keywords: | capital mobility public input provision tax competition |
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