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Regional Tax Coordination and Foreign Direct Investment

  • Haufler, Andreas
  • Wooton, Ian

This Paper analyses 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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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3063.

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Date of creation: Nov 2001
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Handle: RePEc:cpr:ceprdp:3063
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  1. Hans Jarle Kind & Helene Midelfart & Guttorm Schjelderup, 2000. "Competing for Capital in a "Lumpy" World," CESifo Working Paper Series 252, CESifo Group Munich.
  2. 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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  17. Gorg, Holger & Strobl, Eric, 2001. "Multinational Companies and Productivity Spillovers: A Meta-analysis," Economic Journal, Royal Economic Society, vol. 111(475), pages F723-39, November.
  18. Keen, Michael, 2001. "Preferential Regimes Can Make Tax Competition Less Harmful," National Tax Journal, National Tax Association, vol. 54(n. 4), pages 757-62, December.
  19. Michael Rauscher, 1995. "Environmental regulation and the location of polluting industries," International Tax and Public Finance, Springer, vol. 2(2), pages 229-244, August.
  20. 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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