scholarly journals Dynamic Tax Competition, Home Bias and the gain from Non-preferential Taxation Regimes: A case for unilateral commitment

2021 ◽  
Author(s):  
Kaushal Kishore
Keyword(s):  
Tax Competition ◽  
Initial Period ◽  
Home Bias ◽  
Subgame Perfect Equilibrium ◽  
Jel Classification ◽  
Tax Revenue ◽  
Perfect Equilibrium ◽  
Period Model

Abstract A country has an incentive to unilaterally commit to a non-preferential taxation regime even though the competitor adopts a preferential taxation regime. We show that a mixed taxation regime arises in a dynamic two-period model of tax competition between two symmetric countries where an investor has home-bias for the country where he/she invests in the initial period. A scenario where competing countries jointly adopt non-preferential taxation regimes is also a subgame-perfect equilibrium. The tax revenue of the country which adopts a preferential taxation regime in a mixed taxation regime is equal to the tax revenue a country receives when competing countries jointly adopt a non-preferential taxation regime.JEL classification: F21; H21; H25; H87

scholarly journals TAX COMPETITION, POLICY COMPETITION AND THE STRATEGIC USE OF POLICY RESTRICTIONS ON FOREIGN DIRECT INVESTMENTS

2021 ◽  
pp. 1-19
Author(s):  
KAUSHAL KISHORE
Keyword(s):  
Foreign Investment ◽  
Competition Policy ◽  
Tax Competition ◽  
Initial Period ◽  
Tax Revenue ◽  
Foreign Direct Investments ◽  
Sunk Cost ◽  
The Government ◽  
Tax Holidays ◽  
Period Model

In a dynamic two-period model of tax competition, where competing countries strategically choose foreign investment restrictions which increases the sunk cost of investments, we show that choosing a higher level of restriction is beneficial for the competing countries. A higher level of restriction reduces competition and increases tax revenue in the later period, which allows the government to offer large tax holidays during the initial period of investment. The result is counter-intuitive as it is widely believed that sunk cost reduces foreign direct investments. Moreover, even though competing countries are ex-ante symmetric, the equilibrium choice of the level of restrictions may not be equal.

scholarly journals Tax Competition between Symmetric Countries for Large Asymmetric Investors

2021 ◽  
Author(s):  
Kaushal Kishore
Keyword(s):  
Tax Competition ◽  
Mixed Strategy ◽  
Subgame Perfect Equilibrium ◽  
Complete Characterization ◽  
Tax Revenue ◽  
Perfect Equilibrium ◽  
Initial Stage ◽  
Mobile Capital ◽  
Tax Holiday

Abstract In a dynamic two-period game between two symmetric countries, we show that a unique subgame-perfect equilibrium arises during the initial stage of the game. A mixed taxation regime arises in the equilibrium where one country adopts a non-preferential taxation regime while its competitor adopts a preferential taxation regime. The country with a non-preferential taxation regime earns a higher tax revenue compared to the country with a preferential taxation regime. A tax holiday does not arise during the initial stage of the game when the size of the mobile capital base that enters during the later stage is considerably larger than the size of the mobile capital base that enters the economy during the initial stage. We provide the complete characterization and proof of the uniqueness of the mixed strategy Nash equilibrium.JEL classification: F21, H21, H25, H87

scholarly journals Competition for FDI with vintage investment and agglomeration advantages: A revisit

2021 ◽  
Author(s):  
Kaushal Kishore
Keyword(s):  
Tax Competition ◽  
Initial Period ◽  
Complete Characterization ◽  
The Other ◽  
Tax Revenue ◽  
Tax Revenues ◽  
Agglomeration Effect ◽  
Other Hand ◽  
Agglomeration Effects ◽  
First Mover

Abstract We analyze the taxation regimes that may emerge in a two-period dynamic tax competition game where a country that attracts investments during the initial period has agglomeration advantages during the later period. When competing countries choose taxation regimes simultaneously, mixed taxation may arise in an equilibrium where one country adopts a non-preferential and the other adopts a preferential taxation regime. Equilibrium tax revenues of competing countries decrease with the increase in agglomeration effects. Whether a country with a non-preferential or a preferential taxation regime obtains a higher tax revenue depends critically on the extent of agglomeration effects. Moreover, whether a country with a non-preferential or a preferential regime attracts investments during the initial period and in turn will have agglomeration advantages during the later period also depends on the extent of agglomeration effects. When competing countries choose taxation regimes sequentially, a mixed taxation regime arises, and the first mover chooses a non-preferential taxation regime when the agglomeration effect is not very large. On the other hand, when the agglomeration effect is very large, a mixed taxation regime arises where the first mover chooses a preferential and the second mover chooses a non-preferential regime. We provide the complete characterization and proof of the uniqueness of the equilibrium in mixed strategies.JEL classification: F21, H21, H25, H87

Step-by-Step: The Subgame-Perfect Equilibrium

2020 ◽  
pp. 125-140
Author(s):  
Manfred J. Holler ◽  
Barbara Klose-Ullmann
Keyword(s):  
Subgame Perfect Equilibrium ◽  
Perfect Equilibrium

scholarly journals Dynamic tax competition between symmetric countries with multiple strategic investors

2021 ◽  
Author(s):  
Kaushal Kishore
Keyword(s):  
Tax Competition ◽  
Initial Period ◽  
Strategic Interaction ◽  
Tax Rates ◽  
Mixed Strategies ◽  
Full Characterization ◽  
Tax Holidays

Abstract Two symmetric countries compete over two-period under a non-preferential taxation regime to attract multiple investors where investors are strategic and investments are sunk once invested. Contrary to the existing results, we find that tax holidays do not arise during the initial period. Equilibria in mixed strategies arise in both periods where competing countries set strictly positive tax rates during the initial period. Strategic interaction between large investors reduces competition and increases tax rates during the initial period. We provide full characterization and uniqueness of equilibria in mixed strategies.JEL classification: F21, H21, H25, H87

Quantifying Commitment in Nash Equilibria

2019 ◽  
Vol 21 (02) ◽  
pp. 1940011
Author(s):  
Thomas A. Weber
Keyword(s):  
Nash Equilibrium ◽  
Normal Form ◽  
Nash Equilibria ◽  
Dynamic Game ◽  
Subgame Perfect Equilibrium ◽  
Canonical Extension ◽  
Perfect Equilibrium ◽  
Form Game ◽  
Normal Form Game ◽  
The Given

To quantify a player’s commitment in a given Nash equilibrium of a finite dynamic game, we map the corresponding normal-form game to a “canonical extension,” which allows each player to adjust his or her move with a certain probability. The commitment measure relates to the average overall adjustment probabilities for which the given Nash equilibrium can be implemented as a subgame-perfect equilibrium in the canonical extension.

Trends in Collection of Value Added Tax in West Bengal: A Commentary

2016 ◽  
Vol 5 (2) ◽  
pp. 238-248
Author(s):  
H. K. Dwivedi ◽  
Sudip Kumar Sinha
Keyword(s):  
State Government ◽  
West Bengal ◽  
Value Added ◽  
Jel Classification ◽  
Sales Tax ◽  
Tax Revenue ◽  
Value Added Tax ◽  
Tax Base ◽  
Explanatory Variables ◽  
National Economic

As per constitutional provisions of Indian federal finance, value added tax (VAT) (and sales tax) is the main source of revenue for the state government. Value added tax (including sales tax) collected by the Directorate of Commercial Taxes, West Bengal, accounts for approximately 62 per cent of state’s own tax revenue (SOTR). Studies on collection of taxes suggest that revenue from all taxes not only depends directly on the nature and growth of the tax base but depends also on other factors such as economic reforms, global and national economic condition and tax effort of the tax collecting department. The motivation of this article is to try to analyze the nature of the trends in collection of VAT in West Bengal during recent years and to find out the effect of different explanatory variables on collection of VAT. JEL Classification: H26, H71, H3

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