The spread of neoliberal ideas, institutions and policies since the 1980s is one of the key findings of comparative political economy. An important indicator for neoliberal reform has been the downward trend in tax rates imposed on capital. When looking at the most recent data, however, the analyst is surprised by a discrepancy between the trends in tax rates imposed on corporate profits and personal capital income. Why has capital recently been taxed more heavily at the personal than at the corporate level? Conventional theories of tax reform expect a uniform effect of their respective explanatory variable on the taxation of capital. In contrast, we argue that the observed divergence in tax rates on personal capital income and corporate profits is the result of a parallel divergence in the levels of international cooperation against tax evasion and tax avoidance. To test our hypotheses, we perform a differences-in-differences analysis, comparing the evolution of tax rates before and after the establishment of multilateral automatic exchange of information on the capital income of non-residents.
