Enhanced Coorporation in an asymmetric model of Tax Competition

Hendrik Vrijburg () and Ruud de Mooij

No 1002, Working Papers from Oxford University Centre for Business Taxation

Abstract: This paper analyzes enhanced cooperation agreements in corporate taxation in a three country tax competition model where countries differ in size. We characterize equilibrium tax rates and the optimal tax responses due to the formation of an enhanced cooperation agreement. Conditions for strategic complementarity or strategic substitutability of tax rates are crucial for the welfare effects of enhanced cooperation. Simulations show that enhanced cooperation is unlikely to be feasible for small countries. When enhanced cooperation is feasible, it may hamper global harmonization. Only when countries are of similar size is global harmonization a feasible outcome.

Keywords: Tax coordination; Asymmetry; Enhanced Cooperation Agreements; Strategic Tax Response (search for similar items in EconPapers)
JEL-codes: E62 F21 H25 H77 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-pbe
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Related works:
Working Paper: Enhanced Cooperation in an Asymmetric Model of Tax Competition (2010)
Working Paper: Enhanced Cooperation in an Asymmetric Model of Tax Competition (2010)
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