Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/31990 
Year of Publication: 
2001
Series/Report no.: 
cege Discussion Papers No. 14
Publisher: 
University of Göttingen, Center for European, Governance and Economic Development Research (cege), Göttingen
Abstract: 
The paper analyzes the effects of a regionally coordinated profit tax in a model with three active countries, one of which is not part of the union, and a globally mobile firm. We show that regional tax coordination can lead to two types of welfare gains. First, for investments that would take place in the region in the absence of coordination, this measure can transfer location rents from the firm to the union. Second, by internalizing all of the union's benefits from foreign direct investment, a coordinated policy attracts more investment than when member states act in isolation. Consequently, tax levels may rise or fall under regional coordination.
Subjects: 
tax competition
regional coordination
international investment
JEL: 
F15
F23
H73
H87
Document Type: 
Working Paper

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