Title: Tax competition and information sharing in Europe: a signalling game

Authors: Andre Fourcans, Thierry Warin

Addresses: 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.

DOI: 10.1504/IJEBR.2010.029730

International Journal of Economics and Business Research, 2010 Vol.2 No.1/2, pp.76 - 86

Published online: 01 Dec 2009 *

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