The gains from preferential tax regimes reconsidered

Tools

Gaigné, Carl and Wooton, Ian (2011) The gains from preferential tax regimes reconsidered. Regional Science and Urban Economics, 41 (1). pp. 59-66. (https://doi.org/10.1016/j.regsciurbeco.2010.08.002)

[thumbnail of The_Gains_from_Preferential_Tax_Regimes_Reconsidered.pdf]
Preview
 PDF. Filename: The_Gains_from_Preferential_Tax_Regimes_Reconsidered.pdf
Accepted Author Manuscript
Download (332kB)| Preview

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.

ORCID iDs

Gaigné, Carl and Wooton, Ian ORCID logoORCID: https://orcid.org/0000-0001-5084-6379;
CORE (COnnecting REpositories)