Equilibria and Location Choice in Corporate Tax Regimes

Ben J. Niu

Public Finance Review, 2019, vol. 47, issue 2, 433-458

Abstract: This article considers the impact of preferential, base-specific taxation on equilibrium revenues. While policy makers have argued that it generates a prisoner’s dilemma result, there is mixed support in the academic literature. Using a more plausible model with asymmetric base elasticities and heterogeneity of both firms and countries, I find that preferential taxation can generate greater revenues if countries exhibit sufficient productivity and/or population asymmetry. It is also less distortionary except in cases where moving costs are fully deductible. Allowing for noncorrelated, cross-country profits is the key factor as it generates base expansion effects.

Keywords: tax competition; preferential taxation; international; corporate taxation (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:47:y:2019:i:2:p:433-458

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