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Tax competition and information sharing in Europe: a signalling game

Author

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  • Andre Fourcans
  • Thierry Warin

Abstract

This paper provides a challenging view to the tax harmonisation issue. The literature often proposes tax harmonisation to avoid free-riding behaviours in free-trade areas and more particularly in monetary unions. Without tax harmonisation, tax autonomy may lead to a "race to the bottom". The model proposed here shows that tax competition may lead to stability. If a country gives the signal that 'friendly' or coordinated taxation behaviour is not its priority, the result can be a 'race to the bottom'. Conversely, if both countries signal their ability to conduct such a war, this war will not occur, and the stability of the system will be ensured.

Suggested Citation

  • Andre Fourcans & Thierry Warin, 2010. "Tax competition and information sharing in Europe: a signalling game," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 2(1/2), pages 76-86.
    • Handle: RePEc:ids:ijecbr:v:2:y:2010:i:1/2:p:76-86
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    Cited by:

    1. Thierry Warin & Robert E. Prasch, 2013. "Systemic Risk in the Financial Industry: “Mimetism” for the Best and for the Worst," CIRANO Working Papers 2013s-29, CIRANO.

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    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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