Public good differentiation and the intensity of tax competition

Benjamin Zissimos, Myrna Wooders

Research output: Contribution to journalArticle

26 Citations (Scopus)

Abstract

We show that, in a setting where tax competition promotes efficiency, variation in the extent to which firms can use public goods to reduce costs brings about a reduction in the intensity of tax competition. This in turn brings about a loss of efficiency. In this environment, a 'minimum tax' counters the reduction in the intensity of tax competition, thereby enhancing efficiency. 'Split-the-difference' tax harmonization also potentially enhances efficiency but would not be agreed upon by governments because it lowers the payoff to at least one of them. This paper also presents an explanation for how traditionally high-tax countries have continued to set taxes at a relatively high rate even as markets have become more integrated.
Original languageEnglish
Pages (from-to)1105-1121
Number of pages17
JournalJournal of Public Economics
Volume92
Issue number5-6
DOIs
Publication statusPublished - 2008

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