Fiscal considerations may shift governmental priorities away from environmental concerns: Finance ministers face strong demand for public expenditures such as infrastructure investments but they are constrained by international tax competition. We develop a multi-region model of tax competition and resource extraction to assess the fiscal incentive of imposing a tax on carbon rather than on cap...

In federal countries, such as the United States, state and local governments play an important role. They provide many different types of local public goods and services and are able to tailor the amount and quality of these goods to the preferences of their constituencies. To provide these services, state and local governments must raise tax revenues from their residents using a menu of differ...

Hardly any week passes by in ‘Old Europe’ without a discussion about tax reforms as a reaction to the fl at tax challenge of new member countries of the European Union (EU). By many observers this is interpreted as an expression of the race to the bottom that supposedly results from fi erce tax competition in Europe and around the globe. Instead of looking at descriptive fi gures of corporate i...

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper provides an updated overview of tax incentives for...

It is a widely acknowledged result of the literature on capital tax competition that underprovision of public goods can only be avoided if tax coordination between governments is intensive and residence-based capital taxation can be enforced. In this paper we use a model where commodity and factor taxes are available and we show that governments competing for tax bases will choose a globally ef...

a r t i c l e i n f o We present a model of tax competition for real investment and profits and show that the presence of tax havens in some cases increases the tax revenue of countries. In the first part of the paper, we argue that tax competition for profits is likely to be imperfect in the sense that the jurisdiction with the lowest tax rate does not necessarily attract all shifted profits. ...

Theory predicts that strategically-determined tax rates induce negative externalities across countries in relative prices, the wealth distribution and tax revenue. This paper studies the interaction of these externalities in a dynamic, general equilibrium environment and its effects on quantitative outcomes of tax competition in one-shot games over capital income taxes between two governments t...

We develop a model of political competition with endogenous turnout and platforms. Parties trade off incentivizing their supporters to vote discouraging the competing party from voting. show that latter objective is particularly pronounced for an edge in race. Thus, increase support may lead adoption policies favoring its opponents so as asymmetrically demobilize them. study implications econom...

Tax competition in the European Union is fierce. Especially since the entry of the new member States, tax reforms in the ”old” Europe are frequent. In this paper we formally test the presence of strategic tax setting in the old EU14 as a reaction to the tax rates in the new member states using a fiscal reaction function. We first develop a simple model of spatial tax competition that predicts a...

Revenue sharing can be used to discourage low tax regions from competing for capital and firms with high tax regions. However, with heterogeneous regions, revenue sharing involves net transfers across regions and creates a “moral-hazard” problem – that is, regions may want to invest less in market fostering public good when the benefits are shared across nations. This paper analyzes these costs...