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Regional tax coordination and foreign direct investment

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  • Haufler, Andreas
  • Wooton, Ian

Abstract

The paper analyzes the effects of a regionally coordinated profit tax in a model with three active countries, one of which is not part of the union, and a globally mobile firm. We show that regional tax coordination can lead to two types of welfare gains. First, for investments that would take place in the region in the absence of coordination, this measure can transfer location rents from the firm to the union. Second, by internalizing all of the union’s benefits from foreign direct investment, a coordinated policy attracts more investment than when member states act in isolation. Consequently, tax levels may rise or fall under regional coordination. --

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Bibliographic Info

Paper provided by University of Goettingen, Department of Economics in its series Center for European, Governance and Economic Development Research Discussion Papers with number 14.

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Date of creation: 2001
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Handle: RePEc:zbw:cegedp:14

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Postal: Platz der Göttinger Sieben 3, 37073 Göttingen
Web page: http://www.cege.wiso.uni-goettingen.de/
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Keywords: tax competition; regional coordination; international investment;

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References

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  2. Peter Birch Sørensen, 2001. "International Tax Coordination: Regionalism Versus Globalism," CESifo Working Paper Series 483, CESifo Group Munich.
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  7. Konrad, K.A. & Schjelderup, G., 1998. "Fortress Building in Global Tax Competition," Papers 17/98, Norwegian School of Economics and Business Administration-.
  8. Andreas Haufler & Ian Wooton, . "Country Size and Tax Competition for Foreign Direct Investment," Working Papers 9702, Business School - Economics, University of Glasgow.
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  11. Haufler, Andreas & Wooton, Ian, 1999. "Country size and tax competition for foreign direct investment," Munich Reprints in Economics 20408, University of Munich, Department of Economics.
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  18. Haaparanta, Pertti, 1996. "Competition for foreign direct investments," Journal of Public Economics, Elsevier, vol. 63(1), pages 141-153, December.
  19. Michael Keen, 1993. "The welfare economics of tax co-ordination in the European Community : a survey," Fiscal Studies, Institute for Fiscal Studies, vol. 14(2), pages 15-36, February.
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Citations

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Cited by:
  1. Leon Bettendorf & Albert van der Horst & Ruud de Mooij & Hendrik Vrijburg, 2009. "Corporate tax consolidation and enhanced cooperation in the European Union," CPB Discussion Paper 132, CPB Netherlands Bureau for Economic Policy Analysis.
  2. Joy Bhadury & H. Eiselt, 2012. "Optimizing subsidies for the location of distribution centers," The Annals of Regional Science, Springer, vol. 48(1), pages 247-261, February.
  3. Clemens Fuest & Bernd Huber & Jack Mintz, 2003. "Capital Mobility and Tax Competition: A Survey," CESifo Working Paper Series 956, CESifo Group Munich.
  4. Facundo Albornoz, Gregory Corcos and Toby Kendall, 2005. "Subsidy Competition and the Mode of FDI: Acquisition vs Greenfield," Discussion Papers 05-15, Department of Economics, University of Birmingham.
  5. Facundo Albornoz & Grégory Corcos, 2005. "Subsidy competition in integrating economies," PSE Working Papers halshs-00590785, HAL.
  6. G. F. Gori & L. Lambertini & A. Tampieri, 2012. "Trade Costs, FDI incentives, and the Intensity of Price Competition," Working Papers wp810, Dipartimento Scienze Economiche, Universita' di Bologna.
  7. Brülhart, Marius & Jametti, Mario, 2004. "Vertical versus Horizontal Tax Externalities: An Empirical Test," CEPR Discussion Papers 4593, C.E.P.R. Discussion Papers.
  8. Osiris J. Parcero, 2009. "Optimal country's policy towards multinationals when local regions can choose between firm-specific and non-firm-specific policies," Working Papers 2009/34, Institut d'Economia de Barcelona (IEB).
  9. Osiris J.Parcero, 2006. "Inter-jurisdiction Subsidy Competition for a New Production Plant: What is the Central Government Optimal Policy?," CRIEFF Discussion Papers 0601, Centre for Research into Industry, Enterprise, Finance and the Firm.
  10. Haufler, Andreas & Wooton, Ian, 2006. "The effects of regional tax and subsidy coordination on foreign direct investment," European Economic Review, Elsevier, vol. 50(2), pages 285-305, February.
  11. repec:hal:wpaper:halshs-00590785 is not listed on IDEAS

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