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| Author: | Janeba, E. Peters, W. |
| Title: | Tax evasion, tax competition and the gains from nondiscrimination: The case of interest taxation in Europe |
| Journal: | Economic Journal
1999 : JAN, VOL. 109:452, p. 93-101 |
| Index terms: | Economic theory Game theory Models Tax evasion Competition Europe |
| Language: | eng |
| Abstract: | In the paper, a game-theoretic approach is used to analyze the taxation of interest income in Europe in the presence of tax evasion. The model allows the success of various reform proposals to get assessed. It is argued that the tax treatment of nonresidents' interest income plays crucial role. When decisions on discrimination and on withholding tax rates are made non-cooperatively, the outcome is similar to a prisoners' dilemma. All countries discriminate, but in equilibrium internationally mobile portfolio capital evades taxation successfully. In contrast, if all governments did not discriminate, tax competition leads to less tax evasion. |
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