Tax Rate Harmonization, Renegotiation and Asymmetric Tax Competition for Profits with Repeated Interaction

Wolfgang Eggert and Jun-ichi Itaya ()

No 214, Discussion paper series. A from Graduate School of Economics and Business Administration, Hokkaido University

Abstract: This paper analyzes a model of corporate tax competition with repeated interaction and with the strategic use of profit shifting within multinationals. We show that international tax coordination is more likely to prevail if the degree of asymmetry in terms of productivity differences between countries is smaller, or if concealment costs of profit shifting are larger when the tax authorities adopt grim-trigger strategies. Allowing for renegotiation in the tax harmonization process generally requires more patient tax authorities to support tax harmonization as a subgame perfect equilibrium. We find somewhat paradoxical situations where higher costs of profit shifting make international tax arrangements less sustainable under weakly-renegotiation-proof strategies.

Keywords: corporate taxation; tax coordination; multinational firms; H25; H87; F23 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2009-10-13
New Economics Papers: this item is included in nep-acc, nep-pbe, nep-pub and nep-ure
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http://hdl.handle.net/2115/39483 (text/html)
https://eprints.lib.hokudai.ac.jp/dspace/bitstream/2115/39483/1/DPA214.pdf (application/pdf)

Related works:
Journal Article: Tax Rate Harmonization, Renegotiation, and Asymmetric Tax Competition for Profits with Repeated Interaction (2014)
Working Paper: Tax Rate Harmonization, Renegotiation and Asymmetric Tax Competition for Profits with Repeated Interaction (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:hok:dpaper:214

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