Tax competition with heterogeneous capital mobility

Steeve Mongrain and John D. Wilson (wilsonjd@msu.edu)
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John D. Wilson: Michigan State University

No 2011/25, Working Papers from Institut d'Economia de Barcelona (IEB)

Abstract: In this paper, we look at corporate fiscal policies set by two competing regions in an environment where firms are heterogonous regarding to their mobility costs. We show that if regions are allow to tax domestic and foreign capital at different rates, they will offer a preferential treatment to foreign firms, even if mobility costs are symmetrically distributed across regions. Preventing such type of preferential treatment raises revenues for both regions, unless there exist a high density of firms with low moving costs. Because preferential tax treatment promotes firms movement for fiscal raisons, such tax regime always generates more social loss due to unnecessary delocalization. We also investigate the effect of heterogeneity among regions.

Keywords: tax competition; capital; mobility; preferential and non-preferential tax regimes (search for similar items in EconPapers)
JEL-codes: H73 H77 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Tax competition with heterogeneous capital mobility (2018)
Working Paper: Tax Competition with Heterogeneous Capital Mobility (2017)
Working Paper: Tax Competition with Heterogeneous Capital Mobility (2015)
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