It is often feared that tax competition might lead to a “race to the bottom” and that the consequence of a reduction in tax rates on capital income would be shrinking capital income tax revenues and diffi culties for national govern ments to perform their usual tasks. The following paper analyses what happened to tax revenues in a number of OECD countries. It turns out that taxes on capital income contribute to the fi nancing of public expenditure to a more or less unchanged extent; nor are there signifi cant changes in the level and structure of total tax revenues.
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