This paper studies fiscal competition among jurisdictions in a dynamic framework, where the degree of mobility of private capital across jurisdictions boundaries is perfect. The optimal tax on mobile capital is a source tax that taxes away factor rents. Further we show that taxation of mobile...

We set up a simple model of tax competition for mobile, highly-skilled and overconfident managers. Firms endogenously choose the compensation scheme for managers, which consists of a fixed wage and a bonus payment in the high state. Managers are overconfident about the probability of the high...

We investigate whether controlled foreign corporation (CFC) rules influence cross-border merger and acquisition (M&A) activity on a global scale. CFC rules are one main anti-tax avoidance measure and potentially lead to immediate taxation of foreign subsidiaries' income at parent level....

This paper shows that OECD’s Pillar Two may increase employment and investment in low-tax countries due to the Substance-based Income Exclusion (SBIE). The SBIE allows to tax-deduct payroll costs and user costs of tangible assets twice from the tax base of the top-up tax owed by subsidiaries...

This paper examines how a fiscal equalization system affects the disciplining effect of competition for capital among heterogeneous regions in a decentralized economy. I build a model in which regions that are heterogeneous in initial endowments try to attract capital by competing public input...

This paper analyzes the relation between tax auditing and fiscal equalization in the context of fiscal competition. We incorporate a model of tax evasion by firms into a standard tax competition framework where regional governments use their audit rates as a strategic instrument to engage in...

Drawing on a wide range of literature and ideas, a new “second-generation theory of fiscal federalism” is emerging that provides new insights into the structure and working of federal systems. After a restatement and review of the first-generation theory, this paper surveys this new body of...

This paper shows that the welfare implications of indirect tax harmonization in a two-country imperfectly competitive framework, are, in general, indeterminate in the presence of public goods: Both countries can be made either worse off or better off. This holds under both the destination and...

This paper studies the design of an optimal pension scheme in an OLG and open economy model. The pension scheme provides a flat rate benefit and is based on the PAYG principle. It thus combines inter- and intra-generational redistribution. In this setting a number of symmetric economies are...