Tax Competition vs. Tax Harmonisation in a Dynamic World Economy
Tax Policy Conference, p. 355, 2003
16 Pages Posted: 3 Jun 2012
Date Written: April 3, 2003
Abstract
In the context of a stylised game theoretical framework of capital tax competition, we show that when repeated policy interactions are associated to a systematic punishment of the deviating policymaker, a co-ordinated outcome can be the solution to the non co-operative tax game. This result suggests that explicit forms of policy co-ordination, such as a centralised tax authority, could in fact be largely unnecessary. However, some explicit co-ordination may continue to be desirable to avoid the pitfalls of tax competition by smaller economies, which benefit most from non co-ordinated strategies.
Keywords: Tax Competition, Tax Harmonisation
JEL Classification: H87
Suggested Citation: Suggested Citation
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