We study the optimal combination of corporate tax rate and tax base in a model of a small open economy with heterogeneous firms. We show that it is optimal for the small country's government to e®ectively subsidize capital inputs by granting a tax allowance in excess of the true costs of...

This paper links recent tax-rate-cut-cum-base-broadening reforms of corporate taxation to the closer integration of international trade. We study the corporate tax structure in a small open economy with heterogeneous firms, in a setting where it is optimal to subsidize capital inputs by granting...

This paper models tax competition for mobile firms that aredifferentiated by their productivities Because taxes affect thedistribution of firms, they affect wages prices, and the number of firmsFrom the social planner’s perspective, optimal taxes efficientlydistribute income between private...