Endogenous Choice on Tax Instruments in a Tax Competition Model: Unit Tax versus Ad Valorem Tax

This paper analyzes an endogenous choice problem with regard to tax instruments in a capital tax competition model. Considering a symmetric and two-region model of tax competition, where each region is allowed to choose either unit or ad valorem tax, we show that selecting unit tax as a policy instrument is the dominant strategy of governments. An interpretation of this result is clearly explained by the properties of the best response curves.

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Year of publication:	2010-01
Authors:	Akai, Nobuo ; Ogawa, Hikaru ; Ogawa, Yoshitomo
Institutions:	Graduate School of Economics, Osaka University
Subject:	Tax competition \| Unit tax \| Ad valorem tax

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Extent:	application/pdf
Series:	Discussion Papers in Economics and Business.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 10-01 24 pages
Classification:	H20 - Taxation, Subsidies, and Revenue. General ; H21 - Efficiency; Optimal Taxation ; H77 - Intergovernmental Relations; Federalism
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008513304