Tax competition in a federation: the role of tax assignment

Pascale Duran-Vigneron, Marie-Laure Breuillé () and Anne-Laure Samson

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Abstract: The purpose of this paper is to compare different forms of inter-municipal tax cooperation. We use a tax competition model in a two-tier framework, where the two tax bases are interdependently mobile. We consider three different tax regimes: tax-base sharing for the two tax bases, tax harmonization of one tax rate, and a mixed form of the preceding two regimes. In this framework, both horizontal externalities (at the municipal and inter-municipal level) and vertical tax externalities (bottom-up and top-down) occur. We show that cooperation generates an increase of tax burden, whatever the form of tax cooperation, and we provide a comparison of the different tax regimes.

Keywords: Inter-municipal cooperation; tax competition; Fiscal Federalism (search for similar items in EconPapers)
Date: 2013-06
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Published in 12th journées Louis-André Gérard-Varet, Jun 2013, Aix en Provence, France

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01685913

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