Incentives and Information Exchange in International Taxation

M. Keen, J.E. Ligthart

Research output: Working paperDiscussion paperOther research output

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Abstract

The exchange of taxpayer-specific information between national tax authorities has recently emerged as a key and controversial topic in international tax policy discussions, most notably with the OECD s harmful tax practices project and the EU s savings tax initiative.This paper analyses the effects of information exchange and withholding taxes, recognizing that countries which agree to exchange information do not forfeit the ability to levy withholding taxes, and also focusing in particular on the effects of innovative revenuesharing arrangements.Amongst the findings are that: (i) the transfer of withholding tax receipts to the residence country, as planned in the EU, has no effect on equilibrium tax rates, but acts purely as a lump sum transfer; (ii) in contrast, allocating some of the revenue from information exchange to the source country counter to usual practice (though no less so than the EU agreement) would have adverse strategic effects on total revenue; (iii) nevertheless, any withholding tax regime is Pareto dominated by information exchange combined with appropriate revenue sharing; and, in particular, (iv) sharing of the additional revenues raised from information provided, while efficiency-reducing, could be in the interests of large (high-tax) countries as a means of persuading small (low-tax) countries to provide that information voluntarily.
Original languageEnglish
Place of PublicationTilburg
PublisherMacroeconomics
Number of pages20
Volume2004-54
Publication statusPublished - 2004

Publication series

NameCentER Discussion Paper
Volume2004-54

Fingerprint

Tax
International taxation
Incentives
Information exchange
Withholding tax
Revenue
Strategic effect
Tax policy
Revenue sharing
Tax rate
Pareto
Authority
Savings

Keywords

  • incentives
  • information
  • taxation
  • competition
  • international economics

Cite this

Keen, M., & Ligthart, J. E. (2004). Incentives and Information Exchange in International Taxation. (CentER Discussion Paper; Vol. 2004-54). Tilburg: Macroeconomics.
Keen, M. ; Ligthart, J.E. / Incentives and Information Exchange in International Taxation. Tilburg : Macroeconomics, 2004. (CentER Discussion Paper).
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Keen, M & Ligthart, JE 2004 'Incentives and Information Exchange in International Taxation' CentER Discussion Paper, vol. 2004-54, Macroeconomics, Tilburg.

Incentives and Information Exchange in International Taxation. / Keen, M.; Ligthart, J.E.

Tilburg : Macroeconomics, 2004. (CentER Discussion Paper; Vol. 2004-54).

Research output: Working paperDiscussion paperOther research output

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AB - The exchange of taxpayer-specific information between national tax authorities has recently emerged as a key and controversial topic in international tax policy discussions, most notably with the OECD s harmful tax practices project and the EU s savings tax initiative.This paper analyses the effects of information exchange and withholding taxes, recognizing that countries which agree to exchange information do not forfeit the ability to levy withholding taxes, and also focusing in particular on the effects of innovative revenuesharing arrangements.Amongst the findings are that: (i) the transfer of withholding tax receipts to the residence country, as planned in the EU, has no effect on equilibrium tax rates, but acts purely as a lump sum transfer; (ii) in contrast, allocating some of the revenue from information exchange to the source country counter to usual practice (though no less so than the EU agreement) would have adverse strategic effects on total revenue; (iii) nevertheless, any withholding tax regime is Pareto dominated by information exchange combined with appropriate revenue sharing; and, in particular, (iv) sharing of the additional revenues raised from information provided, while efficiency-reducing, could be in the interests of large (high-tax) countries as a means of persuading small (low-tax) countries to provide that information voluntarily.

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KW - taxation

KW - competition

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Keen M, Ligthart JE. Incentives and Information Exchange in International Taxation. Tilburg: Macroeconomics. 2004. (CentER Discussion Paper).