A Simple Model of Interjurisdictional Tax competition and Tax Collection

Thierry Madiès (), Ornella Tarola () and Emmanuelle Taugourdeau ()
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Thierry Madiès: UNIFR - Université de Fribourg = University of Fribourg
Ornella Tarola: UNIROMA - Università degli Studi di Roma "La Sapienza" = Sapienza University [Rome]
Emmanuelle Taugourdeau: CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - GENES - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique, CNRS - Centre National de la Recherche Scientifique, IP Paris - Institut Polytechnique de Paris

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Abstract: This paper re-examines the common belief that firm mobility acts as a constraint on subnational governments when they lack tax autonomy. In this case, subnational governments have an incentive to strategically adjust their tax collection rates to influence effective corporate tax burdens. In a two-region model, we analyze the effects of firm mobility on tax collection rates.The regions may differ in firm endowments and tax collection costs. We show that mobility does not necessarily result in weaker tax enforcement. Moreover, under certain cost configurations, the firm-importing region chooses a lower enforcement level than the firm-exporting region, even if the former is larger. In this particular case, mobility tends to amplify differences in firm endowments between the firm-importing and firm-exporting regions.

Keywords: Tax enforcement; Tax competition; Subnational governments (search for similar items in EconPapers)
Date: 2025-12-17
Note: View the original document on HAL open archive server: https://hal.science/hal-05421137v1
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