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Tax Competition and Fiscal Equalization

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  • Marko Köthenbürger

Abstract

This paper analyzes the relation between tax competition and fiscal equalization. In particular, it asks the question whether fiscal equalization schemes can mitigate inefficient tax competition. Two transfer schemes are considered: tax revenue and tax base equalization schemes. The paper shows that equalizing transfers may internalize fiscal externalities. In particular, in a small open economy tax base equalization yields efficient tax rates. Thus, transfer mechanisms with an explicit redistributive character do not always impair efficiency. Copyright Kluwer Academic Publishers 2002

Suggested Citation

  • Marko Köthenbürger, 2002. "Tax Competition and Fiscal Equalization," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(4), pages 391-408, August.
    • Handle: RePEc:kap:itaxpf:v:9:y:2002:i:4:p:391-408
    DOI: 10.1023/A:1016511918510
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    References listed on IDEAS

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