Risk Diversification and Tax Competition: The Influence of Risk Correlations and Tax Provisions on Tax Competition

From standard-portfolio-models the authors derive demand elasticities for risky assets, and combine the results with a simple non-cooperative model of tax competition between capital importing countries. They find that tax rates resulting from tax competition depend heavily on the correlations of ca...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors Berndt, Markus, Reichl, Bettina
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2000
Subjects
Competition
Economic models
Elasticity of demand
Tax rates
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Summary:From standard-portfolio-models the authors derive demand elasticities for risky assets, and combine the results with a simple non-cooperative model of tax competition between capital importing countries. They find that tax rates resulting from tax competition depend heavily on the correlations of capital market indices. If investment alternatives are not correlated, the outcome of both tax competition and a cooperative solution of tax harmonization are identical. The results suggest regional cooperation among capital importing countries. Compared to the exemption method provisions like tax sparing aggravates the harms of tax competition. Die Autoren leiten aus dem Standard-Portfolio-Modell Nachfrageelastizitaten nach riskanten Anlagealternativen her und bringen diese in ein einfaches nicht-kooperatives spieltheoretisches Modell zum Steuerwettbewerb zwischen kapitalimportierenden Landern ein. Wie sich zeigt, hangen die vom Steuerwettbewerb hervorgebrachten Steuersatze stark von den Korrelationen der Marktindices ab. Sind diese nicht korreliert, bringt der Steuerwettbewerb das gleiche Ergebnis hervor wie die kooperative Losung einer Steuerharmonisierung. Die Ergebnisse liefern ferner Argumente fur die regionale Kooperation kapitalimportierender Lander. Zudem wird gezeigt, dass die fiktive Anrechnung auslandischer Quellensteuern den Steuerwettbewerb verscharft.