The gains from preferential tax regimes reconsidered

Carl Gaigné (1) , Ian Wooton (2)

1 SMART-LERECO - Structures et Marché Agricoles, Ressources et Territoires
2 University of Strathclyde [Glasgow]

The EU policy against harmful tax competition aims at eliminating tax policies targeted at attracting the internationally mobile tax base. We construct an imperfectly competitive model of costly trade between two countries. In setting their corporate taxes, governments non-cooperatively decide whether to discriminate between internationally mobile and immobile firms. We find the Nash equilibrium tax regimes. When trade costs are high countries impose a uniform tax on all firms while nations will discriminate between mobile and immobile firms when costs are low. At some trade costs, fiscal competition results in tax discrimination despite uniform taxation being socially preferable.

Mots clés: preferential tax regimes; tax competition; imperfect competition; trade costs; international trade; tax; international economics; economic modelling

Mots clés: coût de transaction; commerce international; taxe; économie internationale; modélisation économique

Domaines: Sciences du Vivant [q-bio]

Carl Gaigné, Ian Wooton. The gains from preferential tax regimes reconsidered. [University works] auto-saisine. 2010, 26 p. ⟨hal-01462633⟩