As a multinational enterprise’s (MNE’s) location choice is based on not only fiscal incentives by host countries but also better quality of transport infrastructure such as ports, governments’ policy designs on them seems tightly associated. This study investigates the impact of fiscal competition between equal-sized countries with different numbers of local firms to attract an MNE on public infrastructure. Our model divides transport costs into infrastructure-independent and infrastructure-dependent parts, and investments in infrastructure reduce the latter costs. We show that the MNE locates in a country without local firms irrespective of fiscal competition. Moreover, our result shows that fiscal competition increases countries’ investments in infrastructure under low infrastructure-independent transport costs. As investments in infrastructure generate positive spillovers, fiscal competition improving transport infrastructure benefits the non-host country and improves global welfare. It is also shown that the host country benefits from fiscal competition although it pays a subsidy for the MNE.

This paper studies international tax competition and answers the questions: Which countries are in competition with one another, and what is the structure of this competition? How did the set of competitors and the strength of competition evolve over time? How would the introduction of a global minimum corporate tax rate affect tax rates around the world? To answer these questions we employ Adaptive Elastic-Net Generalized Method of Moments (AdaENet-GMM) estimators to endogenously infer the tax competition network from global tax regime data covering the period from 1980 to 2020.

This paper explores the effects of a federal law that obligates previously unregulated municipalities in Germany to set a minimum tax rate on firms’ taxable profits. In particular, we examine the tax-policy response of municipalities that compete locally with “tax-haven municipalities”, i.e. municipalities that originally have set lower and, in some cases, even zero tax rates. The analysis distinguishes treated and not-treated municipalities based on their distance to a tax-haven. Our results show that the majority of municipalities do not change their tax policy. Apart from the tax-havens, only high-tax municipalities show a response – they reduce the business tax rate without experiencing a decline in tax revenues.

In a symmetric n-country version of the Kanbur-Keen-model, we study a club obliging members to levy a common tax (additive to their own) on luxury goods, which is redistributed lump-sum to the members. By joining the club, a country engages in a form of flexible Stackelberg leadership raising the tax rates of all countries. In an alternative proposal, the club-tax revenue is used to fund reductions in carbon emissions. Non-participants are induced to raise their tax rates, as the resulting revenue leakage to club members causes emission reductions that benefit all. This effect grows in the club's size, motivating countries to join it. In an illustrative empirical calibration, there is a Subgame Perfect Equilibrium with full participation for tax rates up to 25%. If 7 or more countries are engaged in the tax competition, more tax revenue gets raised than what is achievable via the club rebating the revenue internally.