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Tax Interactions with Asymmetric Information and Nonlinear Instruments

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Abstract

When different layers of government exert their taxing power upon a common base, the decisions made by one tier affect the receipts that the other policymakers can collect. Likewise, when same level authorities derive their receipts from a mobile tax base, a competition mechanism takes place that triggers externalities. This paper proposes a model where both horizontal and vertical interactions take place. Uncertainty concerning the base, that is, the amount of capital likely to be invested, is introduced and a generalization of taxation schemes is provided through the choice of the instruments, in order to assess the robustness of traditional analyses results in a more general and realistic scheme. With respect to a unique government framework, an excessively high level of taxation emerges from the simultaneous interplay of horizontal and vertical tax externalities.
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Dates and versions

hal-03551027 , version 1 (01-02-2022)

Identifiers

  • HAL Id : hal-03551027 , version 1

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Florence Lachet-Touya. Tax Interactions with Asymmetric Information and Nonlinear Instruments. 2009. ⟨hal-03551027⟩
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