Regional Tax Coordination and Foreign Direct Investment

By Andreas H aufler, I. Wootton. Social Science Research Network, 2001

176 citations recorded by the source corpus.

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.

Subfields: Accounting, Economics and Econometrics, Political Science and International Relations

View Paper: https://www.semanticscholar.org/paper/a54f89738b25b2be920a5fd86597540d28b042e8