Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/108219 
Authors: 
Year of Publication: 
2011
Series/Report no.: 
IEHAS Discussion Papers No. MT-DP - 2011/16
Publisher: 
Hungarian Academy of Sciences, Institute of Economics, Budapest
Abstract: 
An agreement about a lower bound for admissible tax rates can reduce the equilibrium tax rate (and thus welfare) in tax competition among fully symmetric countries. This is shown in an infinitely repeated game where the stage game describes the standard tax competition model with source-based taxes and symmetric countries. Repeated interaction may allow countries to sustain cooperation through implicit contracts. Lower bounds on tax rates ('minimum taxes') restrict the ability of countries to punish deviators. This makes cooperation harder to sustain. The introduction of a lower bound on feasible tax rates may thus harm all countries.
Subjects: 
tax competition
tax harmonization
minimum tax
tax floor
repeated games
JEL: 
F21
H87
ISBN: 
978-615-5024-50-4
Document Type: 
Working Paper

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