Year: 1998
Type: article
Abstract: This article analyzes the conditions under which the smaller of two otherwise iden- tical countries prefers the noncooperative Nash equilibrium to a situation of fully harmonized tax rates. A standard two-country model of capital tax competition is extended by allowing for transaction costs, additional countries, and additional tax instruments The effects of introducing either mobility costs or a wage tax instru ment are theoretically ambiguous because they lower both the costs and the benefits of noncooperation from the perspective of the small country. Numerical simulations indicate, however, that for a wide range of parameter values, all model extensions considered reduce the possibility that the small country gains from tax competition.
Source: Public Finance Review
Authors: Wolfgang Eggert, Andreas Haufler
Institution: University of Konstanz
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2284486181