Tax coordination in a cross-hauling model: Conflict or harmony of interest?
The paper analyzes strategic commodity taxation in a model with trade in a single private good which is simultaneously imported by consumers of a high-tax region and exported by its producers. Conditions for the existence of a Nash equilibrium are given and an asymmetry is introduced through different preferences for public goods. Two tax coordination measures are discussed, a minimum tax rate and a coordinated increase in the costs of cross-border shopping. It is shown that tax coordination generally benefits the high-tax country while the low-tax region will gain only if the intensity of tax competition is high in the initial equilibrium or if governments are price-sensitive towards the effective marginal costs of public good supply.
Year of publication: |
1994
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Authors: | Haufler, Andreas |
Institutions: | Fachbereich Wirtschaftswissenschaften, Universität Konstanz |
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