Open AccessFiscal Externalities In The Globally Integrated Market
Author(s) -
Akinori Tomohara
Publication year - 2011
Publication title -
journal of applied business research
Language(s) - English
Resource type - Journals
eISSN - 2157-8834
pISSN - 0892-7626
DOI - 10.19030/jabr.v23i1.1408
Subject(s) - competition (biology) , externality , style (visual arts) , economics , span (engineering) , monetary economics , tax competition , multinational corporation , capital market , international economics , microeconomics , market economy , tax reform , international taxation , finance , ecology , biology , history , civil engineering , archaeology , engineering
While tax competition of mobile capital has been explored in the literature, little attention has been paid to the effects on business incentives for global trading. We show that tax competition creates negative fiscal externalities via distorted production decisions of multinational companies, when the markets across countries are interrelated through intra-firm trade. Pareto improvement may emerge once the governance of the interrelated markets is coordinated across different governments.