Regional Tax Coordination and Foreign Direct Investment

Arbeitspapier

This paper analyses the effects of a regionally coordinated corporate income 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 gain. First, for investments that would take place in the union in the absence of coordination, a coordinated tax increase can transfer location rents from the firm to the union. Second, by internalising all of the union’s benefits from foreign direct investment, a coordinated tax reduction can attract more welfare-enhancing investment than when member states act in isolation. Depending on which motive dominates, tax levels may thus rise or fall under regional coordination.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Munich Discussion Paper ; No. 2003-17

Classification and Topics

• Classification: Wirtschaft ; Economic Integration ; State and Local Government; Intergovernmental Relations: Interjurisdictional Differentials and Their Effects ; International Fiscal Issues; International Public Goods
• Subject: tax competition ; regional coordination ; foreign direct investment

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Haufler, Andreas ; Wooton, Ian
• Event: Veröffentlichung
• (who): Ludwig-Maximilians-Universität München, Volkswirtschaftliche Fakultät
• (where): München
• (when): 2003

Further information

• DOI: doi:10.5282/ubm/epub.61
• Handle: http://hdl.handle.net/10419/104124
• URN: urn:nbn:de:bvb:19-epub-61-5
• Last update: 10.03.2025, 11:44 AM CET