Regional Tax Coordination and Foreign Direct Investment

Andreas Haufler and Ian Wooton ()

Discussion Papers in Economics from University of Munich, Department of Economics

Abstract: This paper analyses the effects of a regionally coordinated corporate income tax in a model with three active countries, one of which is not part of the union, and a globally mobile firm. We show that regional tax coordination can lead to two types of welfare gain. First, for investments that would take place in the union in the absence of coordination, a coordinated tax increase can transfer location rents from the firm to the union. Second, by internalising all of the union’s benefits from foreign direct investment, a coordinated tax reduction can attract more welfare-enhancing investment than when member states act in isolation. Depending on which motive dominates, tax levels may thus rise or fall under regional coordination.

Keywords: tax competition; regional coordination; foreign direct investment (search for similar items in EconPapers)
JEL-codes: F15 H73 H87 (search for similar items in EconPapers)
Date: 2003-07
New Economics Papers: this item is included in nep-ifn and nep-pbe
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Citations: View citations in EconPapers (6)

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https://epub.ub.uni-muenchen.de/61/1/haufler.pdf (application/pdf)

Related works:
Working Paper: Regional Tax Coordination and Foreign Direct Investment (2002)
Working Paper: Regional Tax Coordination and Foreign Direct Investment (2001)
Working Paper: Regional Tax Coordination and Foreign Direct Investment (2001)
Working Paper: Regional Tax Coordination and Foreign Direct Investment (2001)
Working Paper: Regional tax coordination and foreign direct investment (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenec:61

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