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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
    Subjects: Social Sciences > Economic Theory
    Department: Strathclyde Business School > Economics
    Related URLs:
      Depositing user: Miss Jenna Wright
      Date Deposited: 13 Oct 2010 10:09
      Last modified: 17 Feb 2013 16:58
      URI: http://strathprints.strath.ac.uk/id/eprint/28036

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