Tax Rates as Strategic Substitutes

Hendrik Vrijburg, R A Mooij, de

Research output: Contribution to journalArticleAcademicpeer-review

20 Citations (Scopus)
36 Downloads (Pure)


This paper analytically derives conditions under which the slope of the tax-reaction function is negative in a classical tax competition model. If countries maximize welfare, a negative slope (reflecting strategic substitutability) occurs under relatively mild conditions. The strategic tax response is crucial for understanding tax competition games, as well as the welfare effects of partial tax unions (whereby a subset of countries coordinate their tax rates). Indeed, contrary to earlier findings that have assumed strategic complementarity in tax rates, we show that partial tax unions might reduce welfare under strategic substitutability.
Original languageEnglish
Pages (from-to)2-24
Number of pages22
JournalInternational Tax and Public Finance
Issue number1
Publication statusPublished - 27 Dec 2014

Research programs

  • EUR ESE 37


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