Tax competition refers to strategic tax-setting in a non-cooperative game between jurisdictions – whether countries or states or provinces within a federation – with each setting some parameters of its tax system in relation to the taxes set by others. This creates a potential case for international tax coordination, though the revenue impact has as yet been modest (at least in OECD countries). Conflicting national interests make it difficult to design effective coordination schemes.
KeywordsAverage effective marginal tax Beggar-thy-neighbour Capital controls Cooperation Cross-border shopping Excise taxes Flat tax Marginal effective tax rate Tax competition Tax havens Taxation of corporate profits Transfer pricing
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