Tax competition for a mobile factor is different in 'new economic geography settings'compared to standard tax competition models. The agglomeration rent which accrues to themobile factor in the core region can be taxed. Moreover, a tax differential between the coreand the periphery can be maintained. The present paper reexamines this issue in a settingwhich, in addition to core-periphery equilibria, exhibits stable equilibria with partialagglomeration. We show that a tax differential may arise as an equilibrium of the tax gameeven when there is only partial agglomeration and the mobile factor does not derive anagglomeration rent.