Relaxing Tax Competition through Public Good Differentation

Benjamin Zissimos and Myrna Wooders

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: This paper argues that, because governments are able to relax tax competition through public good differentiation, traditionally high-tax countries have continued to set taxes at a relatively high rate even as markets have become more integrated. The key assumption is that firms vary in the extent to which public good provision reduces costs. We show that Leviathan governments are able to use this fact to relax the forces of tax competition, reducing efficiency. When firms can ‘vote with their feet’ tax competition leads firms to locate in ‘too many’ jurisdictions. A ‘minimum tax’ further relaxes tax competition, further reducing efficiency.

Keywords: asymmetric equilibrium; core-periphery; non-renegotiable minimum tax; tax competition; tax harmonization (search for similar items in EconPapers)
JEL-codes: C72 H21 H42 H73 R50 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2005
New Economics Papers: this item is included in nep-pbe, nep-pub and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://warwick.ac.uk/fac/soc/economics/research/w ... issimoswooders05.pdf

Related works:
Working Paper: Relaxing Tax Competition through Public Good Differentiation (2006)
Working Paper: Relaxing Tax Competition through Public Good Differentiation (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:737

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