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Is Targeted Tax Competition Less Harmful than its Remedies?

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Author Info
Eckhard Janeba ()
Michael Smart ()

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Abstract

Some governments have recently called for international accords restricting the use of preferential taxes targeted to attract mobile tax bases from abroad. Are such agreements likely to discourage tax competition or conversely cause it to spread? We study a general model of competition for multiple tax bases and establish conditions for a restriction on preferential regimes to increase or decrease tax revenues. Our results show that restrictions are most likely to be desirable when tax bases are on average highly responsive to a coordinated increase in tax rates by all governments, and when tax bases with large domestic elasticities are also more mobile internationally. Our analysis allows us to reconcile the apparently contradictory results, derived from analyzing special cases, of the previous literature.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 590.

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Date of creation: 2001
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Handle: RePEc:ces:ceswps:_590

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Find related papers by JEL classification:
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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  1. Peter Birch Sørensen, 2000. "The case for international tax co-ordination reconsidered," Economic Policy, CEPR, CES, MSH, vol. 15(31), pages 429-472, October. [Downloadable!] (restricted)
  2. Kanbur, Ravi & Keen, Michael, 1993. "Jeux Sans Frontieres: Tax Competition and Tax Coordination When Countries Differ in Size," American Economic Review, American Economic Association, vol. 83(4), pages 877-92, September. [Downloadable!] (restricted)
    Other versions:
  3. Dhillon, Amrita & Perroni, Carlo & Scharf, Kimberley A., 1999. "Implementing tax coordination," Journal of Public Economics, Elsevier, vol. 72(2), pages 243-268, May. [Downloadable!] (restricted)
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  4. Holmes, Thomas J, 1989. "The Effects of Third-Degree Price Discrimination in Oligopoly," American Economic Review, American Economic Association, vol. 79(1), pages 244-50, March. [Downloadable!] (restricted)
  5. Ralph A. Winter, 1997. "Colluding on Relative Prices," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 359-371, Summer. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Andreas Haufler & Marco Runkel, 2008. "Firms’ Financial Choices and Thin Capitalization Rules under Corporate Tax Competition," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  2. Thierry Warin & André Fourçans, 2006. "Tax Competition and Information Sharing in Europe: A Signaling Game," Middlebury College Working Paper Series 0605, Middlebury College, Department of Economics. [Downloadable!]
  3. Nicolas Marceau & Steeve Mongrain & John D. Wilson, 2007. "Why Do Most Countries Set High Tax Rates on Capital?," Cahiers de recherche 0711, CIRPEE. [Downloadable!]
    Other versions:
  4. Sam Bucovetsky & Andreas Haufler, 2006. "Preferential Tax Regimes with Asymmetric Countries," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  5. Sam Bucovetsky & Andreas Haufler, 2005. "Tax Competition when Firms Choose their Organizational Form: Should Tax Loopholes for Multinationals be Closed?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  6. Jack Mintz, 2004. "Corporate Tax Harmonization in Europe: It's All About Compliance," Asia-Pacific Financial Markets, Springer, vol. 11(2), pages 221-234, March. [Downloadable!] (restricted)
    Other versions:
  7. Andreas Haufler, 2007. "Sollen multinationale Unternehmen weniger Steuern bezahlen?," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 76(2), pages 8-20. [Downloadable!] (restricted)
  8. Peter Egger & Wolfgang Eggert & Hannes Winner, 2007. "Saving Taxes Through Foreign Plant Ownership," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  9. Alexander Klemm, 2009. "Causes, Benefits, and Risks of Business Tax Incentives," IMF Working Papers 09/21, International Monetary Fund. [Downloadable!]
  10. Thiess Buettner & Michael Overesch & Ulrich Schreiber & Georg Wamser, 2006. "The Impact of Thin-Capitalization Rules on Multinationals' Financing and Investment Decisions," Working Papers 2006-06, University of Kentucky, Institute for Federalism and Intergovernmental Relations. [Downloadable!]
    Other versions:
  11. Haufler, Andreas, 2006. "Die Besteuerung multinationaler Unternehmen," Discussion Papers in Economics 1153, University of Munich, Department of Economics. [Downloadable!]
  12. Kaushal Kishore, 2008. "Tax Competition, Imperfect Capital Mobility and the gain from non-preferential agreements," Departmental Working Papers 0804, Southern Methodist University, Department of Economics. [Downloadable!]
  13. Joel Slemrod & John D. Wilson, 2006. "Tax Competition With Parasitic Tax Havens," NBER Working Papers 12225, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Christoph Sauer & Margit Schratzenstaller, 2002. "Strategies Of International Fiscal Competition For Foreign Direct Investment In A Model With Impure Public Inputs," Departmental Discussion Papers 115, University of Goettingen, Department of Economics. [Downloadable!]
  15. Alexander Haupt & Tim Krieger, 2009. "The Role of Mobility in Tax and Subsidy Competition," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  16. Joeri Gorter & Khaled Moussa Diaw, . "The remedy may be worse than the disease: A critical account of The Code of Conduct," CPB Discussion Papers 5, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  17. Michael Keen & Jenny Ligthart, 2006. "Information Sharing and International Taxation: A Primer," International Tax and Public Finance, Springer, vol. 13(1), pages 81-110, January. [Downloadable!] (restricted)
  18. Keen, M. & Ligthart, J.E., 2004. "Information sharing and international taxation," Discussion Paper 117, Tilburg University, Center for Economic Research. [Downloadable!]
  19. Eggert, Wolfgang & Haufler, Andreas, 2006. "Company tax coordination cum tax rate competition in the European Union," Discussion Papers in Economics 902, University of Munich, Department of Economics. [Downloadable!]
    Other versions:
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