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Levelling the playing field internationally: The effect on competition, collusion and welfare

Tildelt: kr 0,25 mill.





2006 - 2006

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The purpose of this research project is to analyze the effect of harmonization of corporate tax systems on international collusive behaviour and national welfare. It is well known and documented that international cartels exist, and such behaviour is ackn owledged to cause damage to the economy and consumer welfare. The European Commission, for example, has fined car producers for preventing cross-country sales, and international cartels within the plastic and electronic industry have also been brought to court by the Scandinavian countries. The potential damage to the economy by cartels is quite substantial. Monti (2001), for example, states: ?Estimations by the OECD in its recent Report on Hard Core Cartels (OECD 2000) have provided dramatic figures. T he average increase from price fixing is estimated to amount to 10% of the selling price and the corresponding reduction of output to be as high as 20%. In some recent major cases prices have been increased by the cartel participants by 30% to 50%. This project wishes to study the effect of capital tax harmonization by analysing how different approaches to harmonization affect collusive behaviour and welfare. A natural definition of a harmonizing company tax reform is one which narrows or eliminates the difference between tax rates and/or deductibility rates. Unilateral harmonization, i.e. when one country changes its tax parameters to a minimum standard, has been the vehicle for harmonization of commodity taxes within the European Union. Bilateral harmo nization, in contrast, is a process where countries change their tax rates and/or deductibility rules to a common standard. The project wants to investigate if bilateral harmonization is preferable to unilateral harmonization, and what the effect is on ca rtels and welfare of tax rate and tax base harmonization.




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