We analyse environmental taxation in an international setting, where a multinational company produces a good whose consumption causes a negative externality. We study the joint effects of imperfect competition, corporate tax and profit-shifting activities on the optimal level of environmental taxation. In a two-country framework, we show that in both countries the environmental tax that is set lower than the level allowing to fully internalise environmental costs. Profit shifting causes a further decrease in the low-business-tax country. Finally, we show that policies aimed at reducing profit shifting may have countervailing effects on environmental tax setting.

Environmental taxation and profit-shifting activities

Levaggi R.;Panteghini P. M.
2023-01-01

Abstract

We analyse environmental taxation in an international setting, where a multinational company produces a good whose consumption causes a negative externality. We study the joint effects of imperfect competition, corporate tax and profit-shifting activities on the optimal level of environmental taxation. In a two-country framework, we show that in both countries the environmental tax that is set lower than the level allowing to fully internalise environmental costs. Profit shifting causes a further decrease in the low-business-tax country. Finally, we show that policies aimed at reducing profit shifting may have countervailing effects on environmental tax setting.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11379/592336
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