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Harmful Tax Practices: To Brook or to Ban?

Author

Listed:
  • Khaled Moussa Diaw
  • Joeri Gorter

Abstract

The Code of Conduct for business taxation may, diametrically opposed to its intention, aggravate tax competition between EU Member States. The reason is that, by restricting harmful tax practices, it induces cuts in generic tax rates that may reduce tax revenue. If one believes that governments benevolently maximize utility, then this should lead to additional underprovision of public goods. We show within a standard tax-competition framework that this scenario is more likely to unfold with a higher upper bound for nondistortionary taxes, a higher responsiveness of mobile capital to tax rate differentials, and a smaller endowment of internationally mobile capital.

Suggested Citation

  • Khaled Moussa Diaw & Joeri Gorter, 2002. "Harmful Tax Practices: To Brook or to Ban?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 59(2), pages 249-263, May.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(2002/200305)59:2_249:htptbo_2.0.tx_2-u
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    Cited by:

    1. Sanz Córdoba, Patricia & Theilen, Bernd, 1965-, 2017. "Strategic Responses to International Tax Competition: Fiscal (De) Centralization versus Partial Tax Harmonization," Working Papers 2072/306513, Universitat Rovira i Virgili, Department of Economics.

    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • D60 - Microeconomics - - Welfare Economics - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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