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Is Tax Harmonization Useful?

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  • Wolfgang Eggert

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  • Bernd Genser

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Abstract

It is a widely acknowledged result of the literature on international tax competition that an inefficient provision of public goods can only be avoided, if taxes are sufficiently coordinated. In this paper we use a model where governments use commodity and factor taxes in the tax competition game. We show that governments will always choose a second-best efficient tax structure in the Nash equilibrium if they have access to a residence-based capital tax and either a destination-based commodity tax or a labor tax. Moreover, we show that tax competition need not foreclose third-best efficiency in a world with a restricted tax policy toolkit. Copyright Kluwer Academic Publishers 2001

Suggested Citation

  • Wolfgang Eggert & Bernd Genser, 2001. "Is Tax Harmonization Useful?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(4), pages 511-527, August.
  • Handle: RePEc:kap:itaxpf:v:8:y:2001:i:4:p:511-527
    DOI: 10.1023/A:1011243613681
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    References listed on IDEAS

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    1. Wildasin, David E., 1989. "Interjurisdictional capital mobility: Fiscal externality and a corrective subsidy," Journal of Urban Economics, Elsevier, vol. 25(2), pages 193-212, March.
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    10. Mintz, Jack & Tulkens, Henry, 1986. "Commodity tax competition between member states of a federation: equilibrium and efficiency," Journal of Public Economics, Elsevier, vol. 29(2), pages 133-172, March.
    11. Andreas Haufler, 1996. "Optimal factor and commodity taxation in a small open economy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(4), pages 523-527, October.
    12. Kanbur, Ravi & Keen, Michael, 1991. "Tax competition and tax coordination : when countries differ in size," Policy Research Working Paper Series 738, The World Bank.
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    Cited by:

    1. Clemens Fuest & Bernd Huber & Jack Mintz, 2003. "Capital Mobility and Tax Competition: A Survey," CESifo Working Paper Series 956, CESifo Group Munich.
    2. Kozuharov, Sasho & Ristovska, Natasha & Ilieva, Jana, 2015. "Harmonization Of Tax Policies:Reviewing Macedonia And Croatia," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 6(2), pages 255-265.
    3. Zou, Yuxiang & Chen, Tai-Liang, 2016. "International joint venture and welfare-improving tariff-tax reforms," International Review of Economics & Finance, Elsevier, vol. 46(C), pages 27-35.

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