We consider a setting in which capital taxation is characterized by two distortions working in opposite directions. On one hand, governments engage in tax competition and are tempted to lower capital tax rates. On the other hand, they are unable to commit to future policies and, once capital has...

This paper provides a simple theoretical framework for analyzing simultaneous vertical and horizontal competition in excise taxes, and estimates equations informed by the theory on a panel of US state and federal excise taxes on cigarettes and gasoline. We also examine the role played by...

This paper considers the relationship between tax competition and growth in an endogenous growth model where there are stochastic shocks to productivity, and capital taxes fund a public good which may be for final consumption or an infrastructure input. Absent stochastic shocks, decentralized...

This paper tests whether OECD countries compete with each other over corporate taxes in order to attract investment. We develop two models: with …rm mobility, countries compete only over the statutory tax rate or the e¤ective average tax rate, while with capital mobility, countries compete...

This paper provides a simple theoretical model of capital tax competition between countries that differ in spatial location, and where cross-border investment costs are proportional to distance (a gravity model). We model EU membership as a reduction in ‘distance’ between countries. Precise...

The introduction of the Single Market resulted in a switch from destination to origin-based taxation of cross-border transactions by individuals. The theory of commodity tax competition predicts that this change should give rise to excise tax competition and thus intensify strategic interaction...

This paper shows how competition among governments for mobile firms can bring about excessive differentiation in levels of taxation and public good provision. Hotelling’s Principle of Minimum Differentiation is applied in the context of tax competition and shown to be invalid. Instead, when an...

This paper argues that, because governments are able to relax tax competition through public good differentiation, traditionally high-tax countries have continued to set taxes at a relatively high rate even as markets have become more integrated. The key assumption is that firms vary in the...

In this paper we investigate whether there is empical evidence that EU Countries set their public expenditure and their taxes interdependently. We use a panel of data across european countries, years and fiscal variables to estimated countries’ reactions functions. We find evidence of...

In a classic model of tax competition, we show that the level of public good provision and taxation in a Nash equilibrium can be efficient or inefficient with either too much, or too little public good provision. The key is whether there exists a unilateral incentive to deviate from the...