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The gains from preferential tax regimes reconsidered

Gaigné, Carl and Wooton, Ian (2011) The gains from preferential tax regimes reconsidered. Regional Science and Urban Economics, 41 (1). pp. 59-66. ISSN 01660462

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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.

Item type: Article
ID code: 28036
Keywords: preferential tax regimes, trade costs, imperfect competition, tax competition, Economic Theory, Economics and Econometrics, Urban Studies
Subjects: Social Sciences > Economic Theory
Department: Strathclyde Business School > Economics
Depositing user: Miss Jenna Wright
Date Deposited: 13 Oct 2010 09:09
Last modified: 15 Apr 2015 11:24
URI: http://strathprints.strath.ac.uk/id/eprint/28036

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