When do small countries win tax wars?

Wolfgang Eggert and Andreas Haufler

No 304, Discussion Papers, Series II from University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy"

Abstract: The paper analyzes the conditions under which the smaller of two otherwise identical countries prefers the non-cooperative Nash equilibrium to a situation of fully harmonized tax rates. A standard two-country model of capital tax competition is extended by allowing for transaction costs, additional countries, and additional tax instruments. The effects of introducing either mobility costs or a wage tax instrument are theoretically ambiguous because they lower both the costs and the benefits of non-cooperation from the perspective of the small country. Numerical simulations indicate, however, that for a wide range of parameter values all model extensions considered reduce the possibility that the small country gains from tax competition.

JEL-codes: F15 H73 H77 (search for similar items in EconPapers)
Date: 1996
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Related works:
Journal Article: When Do Small Countries Win Tax Wars? (1998)
Working Paper: When do small countries win tax wars? (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:kondp2:304

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