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Work in Progress

Presently I am working on following papers:

Education: Optimal Choice and Efficient Policy, jointly with Kerstin Schneider, Feb. 2019

Abstract: This paper argues that it suffices to assume distortionary wage taxation to prove the efficiency of effective subsidization of education. The paper does not rely on considerations of equity and market failure to justify subsidies. Instead, the optimal subsidy reduces the social cost of distortive wage taxation. The theoretical approach assumes a Mincer-type earnings function, analyzes corner solutions of optimal schooling choice, and derives the result of efficient subsidization in a Ramsey-type framework. Second-best policy is confronted with empirical evidence from OECD countries. The majority of countries are shown to subsidize tertiary education in effective terms.

Aligning Profit Taxation with Value Creation, Feb. 2019

Abstract: The OECD seeks to align transfer pricing and profit taxation with value creation. By drawing on cooperative game theory this paper interprets the notion of value creation more broadly than the OECD does. The broader interpretation allows rejecting the claim that the current system of international profit taxation is aligned with value creation. It is shown that taking the OECD’s objective serious provides support for a tax system in which profit earned on knowhow is split between the involved jurisdictions. This result triggers the question of possible implementation which is discussed in some detail.

Taxing Profit from Remote Supplies of Digital Services, Sept. 2018

Abstract: The employment of capital is rival in nature. Small countries do not benefit from taxing its employment. By contrast, the use of digital services is non-rival and small countries do benefit from taxing expenditures on such services. In fact, some countries have already decided to tax digital sales. If such practice spreads, the quality of digital services will be negatively affected. It is argued that countries exporting digital services have reason to respond by promoting an international tax regime in which the profit earned on remote supplies of digital services is split between the countries involved.



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Prof. em. Dr. Dr. h.c. Wolfram F. Richter
Tel.: 0231 755-3146