Pollution and capital tax competition within a regional block

The paper examines the interaction among taxes on factors income, environmental quality and welfare. We construct a two-country regional block model with capital mobility and crossborder pollution. Pollution in the two countries is simultaneously abated by the private sector, in response to a pollution tax and by the public sector utilizing income and pollution tax revenue. We demonstrate, among other things, that due to the existence of cross-border pollution in many cases the Nash optimal policy on capital income is a positive tax, even if taxes on the income of immobile factors are chosen optimally. This tax rate increases with the degree of cross-border pollution.

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Year of publication:	2004
Authors:	Hadjiyiannis, Costas ; Hatzipanayotou, Panos ; Michael, Michael S.
Publisher:	Munich : Center for Economic Studies and Ifo Institute (CESifo)
Subject:	Kapitalertragsteuer \| Ökosteuer \| Umweltpolitik \| Steuerwettbewerb \| Optimale Besteuerung \| Grenzüberschreitende Umweltbelastung \| Internationale Kapitalmobilität \| Zwei-Länder-Modell \| Theorie \| optimal income taxes \| public pollution abatement \| cross-border pollution \| capital mobility

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Series:	CESifo Working Paper ; 1208
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	856635413 [GVK] hdl:10419/18847 [Handle]
Classification:	F18 - Trade and Environment ; F15 - Economic Integration ; F22 - International Migration ; H21 - Efficiency; Optimal Taxation
Source:	EconStor