Title: Tax competition and information sharing in Europe: a signalling game
Author: Andre Fourcans, Thierry Warin
Department of Economics, ESSEC Business School, av. Bernard Hirsch, 95021 Cergy-Pontoise (Paris), France.
Department of Economics, Middlebury College, Middlebury, Vermont 05753, USA
Abstract: This paper provides a challenging view to the tax harmonisation issue. The literature often proposes tax harmonisation to avoid free-riding behaviours in free-trade areas and more particularly in monetary unions. Without tax harmonisation, tax autonomy may lead to a ''race to the bottom''. The model proposed here shows that tax competition may lead to stability. If a country gives the signal that 'friendly' or coordinated taxation behaviour is not its priority, the result can be a 'race to the bottom'. Conversely, if both countries signal their ability to conduct such a war, this war will not occur, and the stability of the system will be ensured.
Keywords: EMU; Economic and Monetary Union; economic integration; tax competition; tax harmonisation; fiscal competition; taxation; European Union; EU; free-trade areas; information sharing; business research; Euro.
Int. J. of Economics and Business Research, 2010 Vol.2, No.1/2, pp.76 - 86
Available online: 01 Dec 2009