Tax Competition and Tax Revenues

It is often feared that tax competition might lead to a “race to the bottom” and that the consequence of a reduction in tax rates on capital income would be shrinking capital income tax revenues and difficulties for national governments to perform their usual tasks. The following paper analyses what happened to tax revenues in a number of OECD countries. It turns out that taxes on capital income contribute to the financing of public expenditure to a more or less unchanged extent; nor are there significant changes in the level and structure of total tax revenues.