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EU Regional Policy and Tax Competition

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  • Johannes Becker

    ()
    (Oxford University Centre for Business Taxation)

  • Clemens Fuest

    ()
    (Oxford University Centre for Business Taxation)

Abstract

The European Union provides coordination and financing of trans-European transport infrastructures, i.e. roads and railways, which link the EU Member States and reduce the cost of transport and mobility. This raises the question of whether EU involvement in this area is justified by inefficiencies of national infrastructure policies. Moreover, an often expressed concern is that policies enhancing mobility may boost tax competition. We analyse these questions using a model where countries compete for the location of profitable firms. We show that a coordination of investment in transport cost reducing infrastructures within union countries enhances welfare and mitigates tax competition. In contrast, with regard to union-periphery infrastructure, the union has an interest in a coordinated reduction of investment expenditures. Here, the effects on tax competition are ambiguous. Our results provide a rationale for EU-level regional policy that supports the development of intra-union infrastructure.

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Bibliographic Info

Paper provided by Oxford University Centre for Business Taxation in its series Working Papers with number 0902.

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Date of creation: 2009
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Handle: RePEc:btx:wpaper:0902

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Keywords: European Union; Infrastructure; Regional Policy; Tax Competition;

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References

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Citations

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Cited by:
  1. Haupt, Alexander & Krieger, Tim, 2013. "The role of mobility in tax and subsidy competition," Discussion Paper Series 2013-02, University of Freiburg, Wilfried Guth Endowed Chair for Constitutional Political Economy and Competition Policy.
  2. Alexei Alexandrov & Özlem Bedre-Defolie, 2011. "Sales tax competition and a multinational with a decreasing marginal cost," ESMT Research Working Papers ESMT-11-01, ESMT European School of Management and Technology.
  3. Julia Darby & Ben Ferrett & Ian Wooton, 2013. "FDI, Trade Costs and Regional Asymmetries," CESifo Working Paper Series 4469, CESifo Group Munich.
  4. Kyoko Hirose & Kazuhiro Yamamoto, 2013. "Asymmetric international transport costs and tax competition: the influence of a third country," Discussion Papers 59, Kyushu Sangyo University, Faculty of Economics.
  5. Johannes Becker & Clemens Fuest, 2009. "EU Regional Policy and Tax Competition," Working Papers 0902, Oxford University Centre for Business Taxation.
  6. Michael Keen & Kai A. Konrad, 2012. "International Tax Competition and Coordination," Working Papers international_tax_competi, Max Planck Institute for Tax Law and Public Finance.
  7. Johannes Becker & Andrea Schneider, 2014. "Bidding for Firms with Unknown Characteristics," CESifo Working Paper Series 4806, CESifo Group Munich.

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