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Electronic commerce may be a great equalizer that helps to reduce, or even to eliminate, distance-related barriers to trade, but it can also exacerbate a so-called 'digital dividend' vis-à-vis countries with technological and infrastructural defi ciencies, especially developing countries. In the following we concentrate on trade distortion caused by taxation of e-trade in intangible goods. We believe this will have a particular ramifi cation for the developing world. General Agreement on Trade in Services (GATS) provisions may be relevant to many concerns with respect to the regulations of e-commerce, such as online privacy protection, illegal or illicit content, cyber crime and fraud, enforcement of contracts, consumer protection, and taxation. In this paper, we will focus our debate mainly on the issues of taxation of e-trade with respect to the two basic principles of the WTO, that is. the Most Favoured Nation (MFN) and the National Treatment (NT) principles.

The liberalization of international financial flows and foreign direct investment has induced countries to use diverse measures to attract inflow of foreign capital and foreign direct investment, which is expected to have a positive effect on the growth of GDP and thus a positive effect on social welfare. Tax exemption, reduction of tax rate, tax holiday, or diverse subsidies are some of the most important measures used. In this paper we study international tax cooperation, i.e., countries change and especially reduce tax rate for corporate income or for asset revenues to attract inflow of foreign direct investment. Both theoretical and empirical studies have shown the sensibility of foreign direct investment decision with respect to tax rate differences between home countries and host countries. In general, more inflow of foreign direct investment can be expected if the tax rate of the home country is lower than that of foreign countries. This is the main reason for international tax cooperation. In this paper we propose a simple model to prove the sub-optimal Nash non cooperative solution in a two-country tax-competition game. The model shows that international tax cooperation can improve welfare of the participating countries. How to reach a cooperative solution for an international tax competition game (ITCG) is therefore an important issue for further discussions and studies. International institutions can play a crucial role to reach international tax cooperation or international tax harmonization. Copyright Springer-Verlag/Wien 2004international tax cooperation and harmonisation, foreign direct investment, welfare, game theory,

It is not unreasonable to assurne that a healthy federal system is a homeostatic system; however it would be unrealistic to assurne that this system may not be pathologically disturbed. The paper shows some of these pathological phenomena and it gives some examples of federal systems reacting constructively or distructively on these disturbances.

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