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In this work, we simulate the effects of the tax autonomy of the Austrian states on the levels of public employment in each state. We show that depending on the strength of the public sector lobby, tax autonomy would require a reduction of employment in the public sector of between 25 and 35% of the current level. We also show that tax autonomy increases welfare levels by 1-1.5%; that is, the positive change in the disposable income of the workers more than offsets the welfare loss resulting from the lower provision of public goods. Finally, we show that the reduction of public employment is superior in terms of welfare to an alternative scenario in which employment levels are held constant but the wage levels in the public sector are adjusted. [ABSTRACT FROM AUTHOR]

Luxembourg and Austria resisted exchanging bank data on non-resident interest income with European Union (EU) partners for over a decade. In March 2014 they eventually gave in. Theories of tax competition analysts usually apply to intra-EU bargaining over taxation cannot explain their change of tack. Instead, I argue that American imposition of bilateral exchange of information on the two countries unlocked negotiations at EU level. Concessions made to the United States (US) by Luxembourg and Austria activated a most-favoured nation clause contained in an EU directive. Moreover, the US also forced third countries to exchange bank data, thus reducing the risk of capital flight from Luxembourg and Austria. [ABSTRACT FROM AUTHOR]