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This study investigates how tax coordination is formed by governments who are neither entirely benevolent nor wholly self-serving in an asymmetric three-country model of tax competition. Although tax coordination internalizes both fiscal and pecuniary externalities among member countries, it simultaneously encourages members'incentives to deviate from the tax union. The results show that partial tax coordination may increase or decrease the welfare of a non-member country depending on the government's attitudes toward policy objectives, which crucially determine the degree of both externalities. The most noteworthy finding is that the inclination of policymakers'attitudes toward Leviathan make fiscal externality more rigorous, and thus, more likely for partial tax coordination excluding the medium country to prevail.
