Mobile tax base as a global common

If countries anticipate international Bertrand competition in tax rates, they may expend effort that makes some of their taxpayers less mobile or increases the mobility of taxpayers elsewhere. Piecemeal evidence on what activities countries use is provided. Such activities are analyzed that interact with Bertrand tax competition if the size of the groups of loyal and nonloyal citizens or investors is endogenous. Further, the implications of tax harmonization and minimum taxes for these types of nonprice competition are considered. Home attachment reduces the intensity of tax competition, but generates a strategic disadvantage for the country that invests much in such home attachment. Harmonization of taxes and high minimum taxes can intensify countries’ investment in home attachment.

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