Indirect Tax Competition and Harmonization in Europe

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The purpose of this project is to investigate the actual sales tax competition and harmonization in Europe, which is one of the most important economic problems in Europe. Based on the investigation in European countries such as Principality of Liechtenstein, Switzerland and Austria, we can formulate more realistic and more essential model using Nash game equilibrium. For this, we explicitly take account of mobility, cross-border shoppers, geographical variables such as country sizes and locations, and tax policy of EU (European Union).In this year, in order to focus on the mobility extension in the world, we examine empirically and theoretically how the country size and location affect the tax rates and tax revenues. We visit some European small and interior countries and construct simple Nash equilibrium models. First, we examine the actual tax competition and harmonization in Principality of Liechtenstein which is regarded as tax heaven by OECD (Organization for Economic Cooperation and Development). Second, we survey the international papers on spaceless tax competition models in addition to spatial tax competition models. Third, we model tax competition in two-dimensional space using Voronoi diagrams which is fundamental tool in computational geometry. Also, we develop the model in the network and apply it to Japanese tax competition after introducing decentralization of authority. Finally, we publish partially our result in Japanese book, i.e., Introduction to Optimization in Architecture, edited by Architectural Institute of Japan.