Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/46463
Authors: 
Eggert, Wolfgang
Itaya, Jun-ichi
Year of Publication: 
2011
Series/Report no.: 
CESifo working paper: Public Finance 3437
Abstract: 
This paper analyzes a model of corporate tax competition with repeated interaction and with strategic use of profit shifting within multinationals. We show that international tax coordination is more likely to prevail if the degree of asymmetry in terms of productivity differences between countries is smaller, or if concealment costs of profit shifting are larger when the tax authorities adopt grim-trigger strategies. Allowing for renegotiation in the tax harmonization process generally requires more patient tax authorities to support tax harmonization as a subgame perfect equilibrium. We find somewhat paradoxical situations where higher costs of profit shifting may make international tax arrangements less sustainable under weakly-renegotiation-proof strategies.
JEL: 
H25
H87
F23
Document Type: 
Working Paper

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