In the context of international tax coordination incomplete information is one of the well-known frictions that can lead to bargaining failure and might explain a lack of observed coordination. We consider international negotiations about tax coordination under complete and incomplete...

This paper studies optimal income taxation in an environment where matching frictions generate a trade-off for workers between high wages and low unemployment risk. A higher marginal tax rate shifts the trade-off in favor of low unemployment risk, whereas a higher tax burden or unemployment...

Do citizens legislate different tax policies than parliaments? We provide quasi-experimental evidence for causal effects of direct democracy. Town meetings (popular assemblies) replace local councils in small German municipalities below a specific population threshold. Difference-in-differences,...

We investigate how the pass-through rate of commodity taxes depends on competition in a setting where consumers have imperfect information about prices. We use a theoretical search model that has two key predictions: First, the larger the number of price sensitive consumers, the higher the...

Tax law is often uncertain. In particular, the use of tax shelters tends to be in the “grey area” between illegal tax evasion and legal tax avoidance. In this paper I show that uncertainty in tax law can help achieve higher efficiency than allowing or disallowing a tax shelter with...

In West Africa, the Value Added Tax (VAT) policy consists of a uniform tax rate, but several items consumed by rich and poor households, are exempted. We provide an optimal tax framework to reflect on the welfare effects of such a tariff structure, in the context of current debates on domestic...

The OECD’s proposal for a global minimum tax (GMT) of 15% aims for a reversal of a decline of corporate tax rates. We study the revenue effects of the GMT by focusing on strategic tax setting effects. The direct effect from less profit shifting increases revenues in high-tax countries. A...

This paper shows that the OECD inclusive framework of Pillar Two fails to implement the claimed 15% minimum corporate tax for subsidiaries of multinational corporations. The reason is that the Substance-based Income Exclusion of Pillar Two allows to tax-deduct payroll costs and user costs of...

Almost 140 countries have agreed to reallocate the rights to tax international corporate profits and to introduce minimum tax rates. The agreed plan is the product of pragmatism and a search for consensus, but ambitious. It includes steps towards unitary taxation to be established by a...