University of Helsinki
Environmental taxation and tax harmonization.
Degree: Department of Political Science; Helsingfors universitet, Allmän statslära, Institutionen för, 2008, University of Helsinki
This theoretical work is largely based on two papers on international tax harmonization, environmental taxation and tax competition. In particular, the papers "Agglomeration, integration and tax harmonisation" (Baldwin, R. E., Krugman, P., 2004) and "Environmental taxation, tax competition, and harmonization" (Cremer, H., Gahvari, F., 2004) are used to support each other and to follow the logic of the thesis. The structure of present work is based on analysis of the above mentioned literature, thus, dividing it into major parts: the first part is devoted to issues of integration and tax harmonization and the second part extends the discussion to the issues of environmental taxation. The first part explores the issue of whether closer economic integration necessitates harmonization of tax rates among the countries. In this part I analyze the impact of tax harmonization policies, economies agglomeration as well as goods and market integration on international tax competition. The basic tax competition model is used in exploring the effects of agglomeration forces. Further, in this paper I demonstrate that greater economic integration triggers the raise of taxes (referred as 'race to the top'). In addition, 'split the difference' tax harmonization, which basically means agreeing on a tax level that is in between two positions can make both countries worse off, because without it one region can actually set a higher tax rate without having the capital depreciation and thus not to loose a potential tax revenue. This explains why tax harmonization is very rare in the real world. Consequently, the general conclusion is that agglomeration assumptions produce reverse propositions compared to standard tax competition literature. More specifically, the explanation of rare practical implementation of tax harmonization is also that an industrial concentration creates so-called 'agglomeration rent'. The 'core' region can this way set a higher tax rate without having the capital depreciation. Thus, the first part on my thesis analyzes and demonstrates the impact of agglomeration forces on tax harmonization. Second major part of the thesis addresses tax competition problem in the context of transboundary pollution. In particular, I analyze how effective are the policies of partial fiscal coordination. Economic integration is forcing companies to adopt the same or less polluting technologies. This unfortunately results in an increase of aggregate emissions and a decline of welfare. Without proper (partial) tax harmonization policies there is an obvious negative aspect of an economic integration. Additionally, in the second part I examine partial tax harmonization policies. With a higher tax, companies choose less polluting technologies, resulting in a decrease of aggregate emissions and the improvement of welfare. Alternatively, if an emission tax is decreased, companies tend to choose more polluting (cheaper) technologies and aggregate emissions will consequently increase and welfare will…
Subjects/Keywords: agglomeration; tax competition; tax harmonization; polluting technology; pollution; emissions; environmental taxation; agglomeration; tax competition; tax harmonization; polluting technology; pollution; emissions; environmental taxation
to Zotero / EndNote / Reference
APA (6th Edition):
Kurusiov, A. (2008). Environmental taxation and tax harmonization. (Masters Thesis). University of Helsinki. Retrieved from http://hdl.handle.net/10138/10866
Chicago Manual of Style (16th Edition):
Kurusiov, Andrej. “Environmental taxation and tax harmonization.” 2008. Masters Thesis, University of Helsinki. Accessed March 08, 2021.
MLA Handbook (7th Edition):
Kurusiov, Andrej. “Environmental taxation and tax harmonization.” 2008. Web. 08 Mar 2021.
Kurusiov A. Environmental taxation and tax harmonization. [Internet] [Masters thesis]. University of Helsinki; 2008. [cited 2021 Mar 08].
Available from: http://hdl.handle.net/10138/10866.
Council of Science Editors:
Kurusiov A. Environmental taxation and tax harmonization. [Masters Thesis]. University of Helsinki; 2008. Available from: http://hdl.handle.net/10138/10866