Is Capital Taxation Back? – WP 3 (Bamberg)
Between 2010 and 2014 a new global regime on the automatic exchange of account information emerged. Under the regime, most major tax havens report foreign account holders and their capital income to their respective home countries. This makes tax evasion a lot more difficult. As the new regime seems to put brakes on tax competition – the main reason for low taxes on capital income – we want to find out whether the downward trend in tax rates is coming to a halt or even reversing. Of course, many political and institutional factors are likely to mediate the impact of international cooperation on national tax rates. Hence, we assume that the decline in tax rates on capital income will only come to an end, if two things happen at the national level: (a) tax administrations in all countries need to fully implement the new regime’s information exchange provisions; and (b) tax policy makers need to exploit their new leeway and actually increase capital tax rates. Against this background, we want to answer why tax policy and administrative change is transformative in some countries, but incremental or even absent in others? To this effect, we develop several hypotheses. With respect to administrative implementation, initial hypotheses are built around (i) the conflicting interests of high- and low tax countries, (ii) the institutional capacity of national administrations, (iii) and the diffusion of regulatory models among interdependent countries. With respect to tax policy changes, initial hypotheses focus on (i) partisan differences, (ii) countervailing pressures against capital interests coming from the electorate, and (iii) country size determining whether a jurisdiction tends to import or export capital. At a more abstract level, we aim to identify the conditions under which international cooperation becomes a Darwinian devil for the evolution of national tax policy.
Key products:

• Journal-length article on the diverging trends in tax rates on corporate profits and personal capital income.
• Journal-length article on variance in the administrative implementation of automatic exchange of information.
• Journal-length article on variance in tax policy responses to international cooperation.
• Doctoral dissertation