Who benefits from partial tax coordination?

In this paper, we investigate whether partial tax coordination is beneficial to
<br />countries within and outside a tax union, in which countries are supposed to compete
<br />in taxes and infrastructure. Our results demonstrate that, a subgroup of countries
<br />agreeing on a common tax rate, can harm both member and nonmember
<br />states. This is in contrast to the classical findings that partial tax harmonization
<br />is Pareto improving. When a minimum tax rate is imposed within a tax union, we
<br />demonstrate that it does not necessarily improve the welfare of the member countries.
<br />Moreover, both the high tax and low tax countries can be worse off. This
<br />conclusion is at odds with the classical result that a high tax country benefits from
<br />the imposition of a lower tax bound.