Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2010-01-11
Number: 10-011/3
Author-Name: Hendrik Vrijburg
Author-Workplace-Name: Erasmus University Rotterdam
Author-Name: Ruud A. de Mooij
Author-Workplace-Name: Erasmus University Rotterdam
Title: Enhanced Cooperation in an Asymmetric Model of Tax Competition
Abstract: This paper analyzes enhanced cooperation agreements in corporate taxation in a three country tax competition model where countries differ in size. We characterize equilibrium tax rates and the optimal tax responses due to the formation of an enhanced cooperation agreement. Conditions for strategic complementarity or strategic substitutability of tax rates are crucial for the welfare effects of enhanced cooperation. Simulations show that enhanced cooperation is unlikely to be feasible for small countries. When enhanced cooperation is feasible, it may hamper global harmonization. Only when countries are of similar size is global harmonization a feasible outcome.
Classification-JEL: E62, F21, H25, H77
Keywords: Tax coordination; Asymmetry; Enhanced Cooperation Agreements; Strategic Tax Response
File-Url: https://papers.tinbergen.nl/10011.pdf
File-Format: application/pdf
File-Size: 329057 bytes
Handle: RePEc:tin:wpaper:20100011