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The gains from preferential tax regimes reconsidered

Carl Gaigne and Ian Wooton ()

No 10-06, Working Papers SMART - LERECO from INRA UMR SMART-LERECO

Abstract: The EU policy against harmful tax competition aims at eliminating tax policies targeted at attracting the internationally mobile tax base. We construct an imperfectly competitive model of costly trade between two countries. In setting their corporate taxes, governments non-cooperatively decide whether to discriminate between internationally mobile and immobile firms. We find the Nash equilibrium tax regimes. When trade costs are high countries impose a uniform tax on all firms while nations will discriminate between mobile and immobile firms when costs are low. At some trade costs, fiscal competition results in tax discrimination despite uniform taxation being socially preferable.

Keywords: preferential tax regimes; tax competition; imperfect competition; trade costs (search for similar items in EconPapers)
JEL-codes: H87 F12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-pbe and nep-pub
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
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Journal Article: The gains from preferential tax regimes reconsidered (2011) Downloads
Working Paper: The gains from preferential tax regimes reconsidered (2011)
Working Paper: The gains from preferential tax regimes reconsidered (2010) Downloads
Working Paper: The Gains from Preferential Tax Regimes Reconsidered (2010) Downloads
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