Analysis of International Tax Policy in Endogenous Timing Model

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This study examines endogenous timing in an international tax competition model. Unlike existing studies, governments are assumed to decide not only tax rates but also whether they are set early or late. The Nash equilibrium provides three conclusions for alternative double tax allowances. First, tax deductions cause simultaneous tax competition, whereas tax credits yield sequential tax competition. Second, any tax rules would generate capital trade. Third, one country is better off but another is worse off with credits than deductions.