Tax competition and local government cooperation Thierry Madiès, This paper starts with a survey of major results concerning the effects of tax competition on the supply of local public goods and equilibrium tax rates. We then raise the issue of tax cooperation amongst local governments as a means of reducing the spread between local rates of business taxation. We show that, insofar as France, in contrast with most other developed countries, has not been able to impose mergers on local governments, enlarging the area over which taxation of businesses is applied may be economically efficient. However, two types of difficulties have to be solved. First, what is the best choice for the tax jurisdiction ? : Is it the national economy, as suggested by the French National Tax Council, or the regions, or else, more pragmati- cally, a federated group of local governments, as encouraged by the Law of February 1992 ? Second, are localities of different sizes — in particular center cities and suburban governments — willing to cooperate in taxation, while the effects of tax competition differ according to size ? The last section offers a brief survey of what has been achieved so far in France in terms of federating local government entities.