Is Tax Harmonization Useful?

Posted: 13 Nov 2001

See all articles by Wolfgang Eggert

Wolfgang Eggert

University of Freiburg - Institute of Public Finance; CESifo (Center for Economic Studies and Ifo Institute)

Bernd Genser

University of Konstanz - Faculty of Economics and Statistics; CESifo (Center for Economic Studies and Ifo Institute)

Abstract

It is a widely acknowledged result of the literature on international tax competition that an inefficient provision of public goods can only be avoided, if taxes are sufficiently coordinated. In this paper we use a model where governments use commodity and factor taxes in the tax competition game. We show that governments will always choose a second-best efficient tax structure in the Nash equilibrium if they have access to a residence-based capital tax and either a destination-based commodity tax or a labor tax. Moreover, we show that tax competition need not foreclose third-best efficiency in a world with a restricted tax policy toolkit.

Keywords: International taxation, tax interaction, constrained efficiency

Suggested Citation

Eggert, Wolfgang and Genser, Bernd, Is Tax Harmonization Useful?. Available at SSRN: https://ssrn.com/abstract=285522

Wolfgang Eggert (Contact Author)

University of Freiburg - Institute of Public Finance ( email )

D-79098 Freiburg
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Bernd Genser

University of Konstanz - Faculty of Economics and Statistics ( email )

Universitaetsstr. 10
78457 Konstanz
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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