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A General Model of International Tax Competition with Applications

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Abstract

A general version of the ZMW model of international tax competition is presented that confirms and extends the results of the existing literature about the choice of tax policy instruments in the symmetric case when the tax externality is positive for both countries. In the asymmetric case when the tax externality is positive for one country and negative for the other country, it is shown that the results are reversed. This demonstrates the importance of the sign of the tax externality in models of international tax competition. This general model is then used to analyse a couple of policy-relevant applications: depreciation allowances and interest payment deductibility.

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  • Azacis, Helmuts & Collie, David R., 2021. "A General Model of International Tax Competition with Applications," Cardiff Economics Working Papers E2021/31, Cardiff University, Cardiff Business School, Economics Section.
    • Handle: RePEc:cdf:wpaper:2021/31
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    More about this item

    Keywords

    Tax Competition; Proportional Taxes; Per-Unit Taxes; Capital Taxes.;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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