Following recent court rulings, cross-border loss compensation for multinational firms has become a major policy issue in Europe. This paper analyzes the effects of introducing a coordinated cross-border tax relief in a setting where multinational firms choose the size of a risky investment and...

Heterogeneous firm productivity raises the question of whether governments should pursue `pick-the-winner' strategies by subsidizing highly productive firms more, or taxing them less, than their less productive counterparts. We study this issue in a setting where governments can set...

Firms generating larger surpluses on average pay higher wages. We study the effect of this rent-sharing between firms and workers on international tax competition. In our model, firms in a large country can shift surplus to a tax haven. In the benchmark case firms only have a tax incentive for...

A recent empirical literature has arisen documenting the response of one nation?s policy choices, including tax, environmental, and labour policies, to that of others. This has been largely interpreted as evidence of competition, be it for mobile resources (like FDI, taxable book income etc.) or...

Most of the tax competition literature focuses on the provision of local public services to households. However, a number of papers, dating back to Zodrow and Mieszkowski (1986), analyze tax competition when capital taxes are used to finance local public services provided to businesses,...

This paper studies corporate tax competition if it is costly to learn some of the elements that determine the e¤ective tax burden. Search cost may, but need not, eliminate the tax competition pressure. The outcome depends on the boundaries of tax rate and tax base choices. Search cost can...

We introduce tax competition for mobile labor into an optimal- taxation model with two skill levels and analyze a symmetric subgame- perfect Nash equilibrium of the game between two governments and two taxpayer populations. Tax competition reduces the distortion from the informational asymmetry...

We review the empirical literature on competition in source-based taxes on corporate income. Drawing an analogy to the competition models for the goods market indicates how evidence for the existence of tax competition can be provided, and highlights that tax competition can take many forms....

An increase in the taxation of foreign a¢ liates reduces domestic investment, as has recently been empirically shown in Becker and Riedel (2012). This paper investigates the implication of this ?nding for tax competition. It is shown that an increase in the number of multinational ?rms (in...

This note provides a novel argument why countries may have incentives to allow for some profit shifting to low-tax jurisdictions. The reason is that a tightening of transfer pricing policies by high tax countries leads to more agressive tax rate competition by low tax countries.