Rate-Cutting Tax Reforms And Corporate Tax Competition In Europe
AbstractWhile there is a large and growing number of studies on the determinants of corporate tax rates, the literature has so far ignored the fact that the behavior of governments in setting tax rates is often best described as a discrete choice decision problem. We set up an empirical model that relates a government's decision whether to cut its corporate tax rate to the country's own inherited tax and taxes in neighboring countries. Using comprehensive data on corporate tax reforms in Europe since 1980, we find evidence suggesting that the position in terms of the tax burden imposed on corporate income relative to geographical neighbors strongly affects the probability of rate-cutting tax reforms. Countries are particularly likely to cut their statutory tax rate if the inherited tax is high and if they are exposed to low-tax neighbors. Copyright 2010 Blackwell Publishing Ltd.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Economics & Politics.
Volume (Year): 22 (2010)
Issue (Month): 3 (November)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0954-1985
Other versions of this item:
- Heinemann, Friedrich & Overesch, Michael & Rincke, Johannes, 2008. "Rate Cutting Tax Reforms and Corporate Tax Competition in Europe," ZEW Discussion Papers 08-028, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
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