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This paper analyzes the effects of symmetric and asymmetric taxation on performance-based versus fixed remuneration contracts. I integrate a proportional corporation tax and a proportional wage tax into a binary principal-agent model. The wage tax increases the remuneration costs and makes the agent's employment less attractive. Thus, the principal tends to demand lower rather than higher effort or does not offer a contract at all. In contrast to the wage tax, the corporate tax is irrelevant for the optimal remuneration contract. Under asymmetric corporate taxation, the principal tends to offer contracts less frequently. Fixed remuneration contracts are penalized more heavily by asymmetric taxation than performance-based remuneration contracts

We consider competitive firms operating under price uncertainty when taxation is asymmetric (i.e. profits are taxed at a higher rate than losses are compensated). In the absence of risk sharing tools, the larger 'gap' in taxation may either lower or increase the firm's optimal output, depending on whether the relative measure of risk aversion is less than or larger than 1. In the presence of risk sharing markets optimal output does not depend on the tax rates, nor on the price distribution or the firm's attitude towards risk. The firm will engage in hedging and, as a result, will lower its expected taxes.

We examine the combined effects of asymmetric taxation and limited liability on optimal risk taking of investors. Given an optimal risk level in the pre-tax case under full liability, loss-offset restrictions reduce, and limited liability enhances the incentives for taking risk. For every degree of limited liability we can find corresponding loss-offset limitations inducing the same optimal risk level as in the reference case. Thereby we get tax neutrality with respect to risk taking. We show that tax neutrality with respect to risk taking is incompatible with tax neutrality with respect to the choice of the legal form. In our model, full liability requires symmetric taxation and limited liability requires asymmetric taxation of profits and losses

The paper analyzes the effects of a source-based capital income tax on production and market structures, trade and capital flows as well as national and global welfare. The analysis is carried by means of a general equilibrium model of trade which incorporates international capital flows as well as the existence of multinational enterprises. The focus of the paper is on identifying the influence of different absolute and relative factor endowments on the effects of capital income taxation. Simulations of the model show that a one-size-fits-all tax policy does not exist and that governments need to take their own country's factor endowment into account when making tax policy decisions.

The paper analyzes the effects of a source-based capital income tax on production and market structures, trade and capital flows as well as national and global welfare. The analysis is carried by means of a general equilibrium model of trade which incorporates international capital flows as well as the existence of multinational enterprises. The focus of the paper is on identifying the influence of different absolute and relative factor endowments on the effects of capital income taxation. Simulations of the model show that a one-size-fits-all tax policy does not exist and that governments need to take their own country's factor endowment into account when making tax policy decisions.

This paper tackles the issue of international fiscal coordination in a world of integrated markets sovereign national governments. Taxation of mobile capital and immobile labor in order to finance a public good generates inefficient fiscal competition. Two fiscal reforms are considered: a minimum capital tax level and a tax range, i.e., a minimum plus a maximum capital tax level. We show that the introduction of a lower bound to the capital tax level is never preferred to fiscal competition by all countries while there always exists a combination of both a lower and an upper bound which is unanimously accepted.

This paper tackles the issue of international fiscal coordination in a world of integrated markets sovereign national governments. Taxation of mobile capital and immobile labor in order to finance a public good generates inefficient fiscal competition. Two fiscal reforms are considered: a minimum capital tax level and a tax range, i.e., a minimum plus a maximum capital tax level. We show that the introduction of a lower bound to the capital tax level is never preferred to fiscal competition by all countries while there always exists a combination of both a lower and an upper bound which is unanimously accepted.

Since 1980, the aggregate income of oil-exporting countries relative to that of oil- poor countries has been remarkably constant despite structural gaps in productivity growth rates. This stylized fact is analyzed in a two-country model where resource- poor (Home) and resource-rich (Foreign) economies display productivity differences but stable income shares due to terms-of-trade dynamics. We show that Home's income share is positively related to the national tax on domestic resource use, a prediction confirmed by dynamic panel estimations for sixteen oil-poor economies. National governments have incentives to deviate from both efficient and laissez-faire allocations. In Home, increasing the oil tax improves welfare through a rent-transfer mechanism. In Foreign, subsidies (taxes) on domestic oil use improve welfare if R&D productivity is lower (higher) than in Home.

Since 1980, the aggregate income of oil-exporting countries relative to that of oil-poor countries has been remarkably constant despite structural gaps in productivity growth rates. This stylized fact is analyzed in a two-country model where resource- poor (Home) and resource-rich (Foreign) economies display productivity differences but stable income shares due to terms-of-trade dynamics. We show that Home's income share is positively related to the national tax on domestic resource use, a prediction con rmed by dynamic panel estimations for sixteen oil-poor economies. National governments have incentives to deviate from both efficient and laissez-faire allocations. In Home, increasing the oil tax improves welfare through a rent-transfer mechanism. In Foreign, subsidies (taxes) on domestic oil use improve welfare if R&D productivity is lower (higher) than in Home.