The Power Politics of International Tax Cooperation: Why Luxembourg and Austria accepted automatic exchange of information on foreign account holders' interest income

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The Power Politics of International Tax Cooperation: Why Luxembourg and Austria accepted automatic exchange of information on foreign account holders' interest income. / Hakelberg, Lukas.
San Domenico di Fiesole: European University Institute, 2014. (EUI Working Papers; Vol. 2014, No. 26).

Research output: Working paperWorking papers

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@techreport{df07e3fc89c44703821a88bc3df47af1,
title = "The Power Politics of International Tax Cooperation: Why Luxembourg and Austria accepted automatic exchange of information on foreign account holders' interest income",
abstract = "Theories of tax competition predict that small countries competing with large countries benefit, as they find it relatively easy to substitute revenue lost in a tax cut with revenue gained from incoming foreign tax base. If small countries can only lose from tax co-operation, why are Luxembourg and Austria bound to agree to a revised EU Savings Tax Directive that will oblige them to automatically provide information on foreign account holders{\textquoteright} interest income to residence countries? Putting emphasis on the neglected issue of power, I show that Luxembourg and Austria were first coerced into bilateral agreements on automatic exchange of information by the United States, which then activated a most-favored nation clause contained in the EU Directive on Administrative Co-operation in Tax Matters.As a result, the two countries were under a legal obligation to also extend greater co-operation to EU partners.",
keywords = "Politics, international political economy, tax competition, EU politics, power politics, tax policy, Two-Step Approach",
author = "Lukas Hakelberg",
note = "{\textcopyright} Lukas Hakelberg, 2014",
year = "2014",
language = "English",
series = "EUI Working Papers",
publisher = "European University Institute",
number = "26",
address = "Italy",
type = "WorkingPaper",
institution = "European University Institute",

}

RIS

TY - UNPB

T1 - The Power Politics of International Tax Cooperation

T2 - Why Luxembourg and Austria accepted automatic exchange of information on foreign account holders' interest income

AU - Hakelberg, Lukas

N1 - © Lukas Hakelberg, 2014

PY - 2014

Y1 - 2014

N2 - Theories of tax competition predict that small countries competing with large countries benefit, as they find it relatively easy to substitute revenue lost in a tax cut with revenue gained from incoming foreign tax base. If small countries can only lose from tax co-operation, why are Luxembourg and Austria bound to agree to a revised EU Savings Tax Directive that will oblige them to automatically provide information on foreign account holders’ interest income to residence countries? Putting emphasis on the neglected issue of power, I show that Luxembourg and Austria were first coerced into bilateral agreements on automatic exchange of information by the United States, which then activated a most-favored nation clause contained in the EU Directive on Administrative Co-operation in Tax Matters.As a result, the two countries were under a legal obligation to also extend greater co-operation to EU partners.

AB - Theories of tax competition predict that small countries competing with large countries benefit, as they find it relatively easy to substitute revenue lost in a tax cut with revenue gained from incoming foreign tax base. If small countries can only lose from tax co-operation, why are Luxembourg and Austria bound to agree to a revised EU Savings Tax Directive that will oblige them to automatically provide information on foreign account holders’ interest income to residence countries? Putting emphasis on the neglected issue of power, I show that Luxembourg and Austria were first coerced into bilateral agreements on automatic exchange of information by the United States, which then activated a most-favored nation clause contained in the EU Directive on Administrative Co-operation in Tax Matters.As a result, the two countries were under a legal obligation to also extend greater co-operation to EU partners.

KW - Politics

KW - international political economy

KW - tax competition

KW - EU politics

KW - power politics

KW - tax policy

KW - Two-Step Approach

M3 - Working papers

T3 - EUI Working Papers

BT - The Power Politics of International Tax Cooperation

PB - European University Institute

CY - San Domenico di Fiesole

ER -