Séminaire de recherche en économie - GATE-LSE : Grégoire Rota Graziosi

Grégoire Rota Graziosi , CERDI, U. d’Auvergne, présentera un séminaire intitulé : Implementing Tax Coordination and Harmonization Through Voluntary Commitment & The Supermodularity of the Tax Competition Game

Résumé / abstract  :

First, we establish that the log-concavity of the inverse demand for capital, or equivalently the marginal production function, is a sufficient condition to ensure the supermodularity of the tax competition game, when jurisdictions maximize their tax revenue and under standard assumptions of the production function. We then apply some results from supermodular games on tax competition and tax coordination: Nash equilibriums exist and may be Pareto ranked, explaining the race to the bottom and justifying the need for tax coordination. Moreover we show that any increase in the number of tax-competing jurisdictions decreases tax rates and tax revenues and improves the net return of capital. We discuss the role of capital on the supermodularity of the tax competition game by considering successively an elastic worldwide stock of capital and capital ownership. Second, given the property of supermodularity, we follow Schelling's approach by studying voluntary commitment, which constrains countries' respective tax rate choices. We develop a commitment game where countries choose their strategy sets in preliminary stages and play consistently during the final one. We establish under which conditions Pareto-improving tax coordination, and even tax harmonization, are Nash implementable between sovereign countries without any supranational tax authorities. This analysis contributes to the rationale of tax ranges and, more broadly, of non binding but self-enforcing commitments in the context of tax competition.

Co-auteurs/Joint work with  :