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Cover of: Are Moderate Leviathans Harmful to Tax Coordination?
Jun-ichi Itaya, Chikara Yamaguchi

Are Moderate Leviathans Harmful to Tax Coordination?

Section: Articles
Volume 76 (2020) / Issue 2, pp. 165-190 (26)
Published 04.03.2020
DOI 10.1628/fa-2020-0003
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  • 10.1628/fa-2020-0003
This study investigates how the sustainability of partial tax coordination among a subset of countries (i.e., a tax union) is affected when the governments' objective function is moderate Leviathan in that policymakers are neither entirely benevolent nor fully self-interested. We show that partial tax coordination is more likely to prevail either when moderate-Leviathan-type governments become more revenue-maximizing Leviathans or when more wasteful government expenditure is engaged in. Nevertheless, the well-being of the residents in the member countries of the tax union unambiguously deteriorates, while that in nonmember countries is ambiguous.