There is a growing literature on commodity tax competition among countries in the European Union (EU). The motivation for this may be due to the fact that different value-added tax (VAT) without physical border control induces cross-border shoppers who pay the VAT of other countries rather than...

This paper analyses commodity tax competition between two neighboring countries whose governments are tax-revenue maximizers in a two-dimensional market. The results suggest three conclusions in a geographical sense. First, a small country sets a lower tax than does a big country, and per capita...