The Gains from Preferential Tax Regimes Reconsidered

Ian Wooton () and Gaigné, Carl
Authors registered in the RePEc Author Service: Carl Gaigne

No 7814, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The EU policy against harmful tax competition aims at eliminating tax policies targeted at attracting the internationally mobile tax base. We examine this issue by considering two countries which decide their corporate tax rates their tax regimes (discriminatory or non-discriminatory tax policy). Firms produce under imperfect competition and trade between countries is costly. The endogenous spatial allocation of mobile firms depends upon different parameters of the economy while the distribution of immobile firms is exogenous. We show that countries discriminate against immobile firms when trade costs are high. Trade integration makes imposing the same tax on all firms more appealing such that, at low trade costs, the unique Nash equilibrium is characterized by uniform corporate taxes being set by both governments. However, when trade costs reach intermediates values, fiscal competition may lead to tax discrimination while uniform taxation is socially preferred

Keywords: Imperfect competition; Preferential tax regimes; Tax competition; Trade costs (search for similar items in EconPapers)
JEL-codes: F12 H87 (search for similar items in EconPapers)
Date: 2010-05
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP7814 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: The gains from preferential tax regimes reconsidered (2011)
Working Paper: The gains from preferential tax regimes reconsidered (2011)
Working Paper: The gains from preferential tax regimes reconsidered (2010)
Working Paper: The gains from preferential tax regimes reconsidered (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:7814

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP7814

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().