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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Wiley Blackwell in its journal Economics & Politics.
Volume (Year): 22 (2010)
Issue (Month): 3 (November)
Contact details of provider:
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
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Clemens Fuest & Bernd Huber & Jack Mintz, 2003. "Capital Mobility and Tax Competition: A Survey," CESifo Working Paper Series 956, CESifo Group Munich.
- Michael P Devereux, 2007. "Taxes in the EU New Member States and the Location of Capital and Profit," Working Papers 0703, Oxford University Centre for Business Taxation.
- David L. Carr & James R. Markusen & Keith E. Maskus, 2001.
"Estimating the Knowledge-Capital Model of the Multinational Enterprise,"
American Economic Review,
American Economic Association, vol. 91(3), pages 693-708, June.
- David L. Carr & James R. Markusen & Keith E. Maskus, 1998. "Estimating the Knowledge-Capital Model of the Multinational Enterprise," NBER Working Papers 6773, National Bureau of Economic Research, Inc.
- Peter Schwarz, 2007. "Does capital mobility reduce the corporate-labor tax ratio?," Public Choice, Springer, vol. 130(3), pages 363-380, March.
- Mauro Ghinamo & Paolo Panteghini & Federico Revelli, 2007.
"FDI Determination and Corporate Tax Competition in a Volatile World,"
CESifo Working Paper Series
1965, CESifo Group Munich.
- Mauro Ghinamo & Paolo Panteghini & Federico Revelli, 2010. "FDI determination and corporate tax competition in a volatile world," International Tax and Public Finance, Springer, vol. 17(5), pages 532-555, October.
- Mauro Ghinamo & Paolo M. Panteghini & Federico Revelli, 2008. "FDI Determination and Corporate Tax Competition in a Volatile World," Working Papers 0802, University of Brescia, Department of Economics.
- Devereux, Michael P & Griffith, Rachel, 2003.
"Evaluating Tax Policy for Location Decisions,"
International Tax and Public Finance,
Springer, vol. 10(2), pages 107-26, March.
- Devereux, Michael P & Lockwood, Ben & Redoano, Michela, 2002.
"Do Countries Compete over Corporate Tax Rates?,"
CEPR Discussion Papers
3400, C.E.P.R. Discussion Papers.
- Devereux, Michael P & Lockwood, Ben & Redoano, Michela, 2002. "Do Countries Compete Over Corporate Tax Rates?," The Warwick Economics Research Paper Series (TWERPS) 642, University of Warwick, Department of Economics.
- Beck, Thorsten & Clarke, George & Groff, Alberto & Keefer, Philip & Walsh, Patrick, 2000. "New tools and new tests in comparative political economy - the database of political institutions," Policy Research Working Paper Series 2283, The World Bank.
- Federico Revelli, 2002. "Testing the taxmimicking versus expenditure spill-over hypotheses using English data," Applied Economics, Taylor and Francis Journals, vol. 34(14), pages 1723-1731.
- Bordignon, Massimo & Cerniglia, Floriana & Revelli, Federico, 2003. "In search of yardstick competition: a spatial analysis of Italian municipality property tax setting," Journal of Urban Economics, Elsevier, vol. 54(2), pages 199-217, September.
- Enrique G. Mendoza & Assaf Razin & Linda L. Tesar, 1995.
"Effective Tax Rates in Macroeconomics: Cross-Country Estimates of Tax Rates on Factor Incomes and Consumption,"
NBER Working Papers
4864, National Bureau of Economic Research, Inc.
- Mendoza, Enrique G. & Razin, Assaf & Tesar, Linda L., 1994. "Effective tax rates in macroeconomics: Cross-country estimates of tax rates on factor incomes and consumption," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 297-323, December.
- Andreas Haufler & Alexander Klemm & Guttorm Schjelderup, 2006.
"Globalisation and the Mix of Wage and Profit Taxes,"
CESifo Working Paper Series
1678, CESifo Group Munich.
- Haufler, Andreas & Klemm, Alexander & Schjelderup, Guttorm, 2006. "Globalisation and the mix of wage and profit taxes," Discussion Papers in Economics 885, University of Munich, Department of Economics.
- Dani Rodrik, 1997. "Trade, Social Insurance, and the Limits to Globalization," NBER Working Papers 5905, National Bureau of Economic Research, Inc.
- Michela Redoano, 2007. "Fiscal Interactions Among European Countries. Does the EU Matter?," CESifo Working Paper Series 1952, CESifo Group Munich.
- Jan Vermeir & Bruno Heyndels, 2006. "Tax policy and yardstick voting in Flemish municipal elections," Applied Economics, Taylor and Francis Journals, vol. 38(19), pages 2285-2298.
- Beck, T.H.L. & Clarke, G. & Groff, A. & Keefer , P. & Walsh, P., 2001. "New tools in comparative political economy: The database of political institutions," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125517, Tilburg University.
- Federico Revelli, 2001. "Spatial patterns in local taxation: tax mimicking or error mimicking?," Applied Economics, Taylor and Francis Journals, vol. 33(9), pages 1101-1107.
- Christian Bellak & Markus Leibrecht, 2009. "Do low corporate income tax rates attract FDI? - Evidence from Central- and East European countries," Applied Economics, Taylor and Francis Journals, vol. 41(21), pages 2691-2703.
- Michael Devereux & Simon Loretz, 2012. "What do we know about corporate tax competition?," Working Papers 1229, Oxford University Centre for Business Taxation.
- Hansson, Åsa & Porter, Susan & Perry Williams, Susan, 2012. "The Effect of Political and Economic Factors on Corporate Tax Rates," Working Paper Series 942, Research Institute of Industrial Economics.
- Osterloh, Steffen & Debus, Marc, 2012. "Partisan politics in corporate taxation," European Journal of Political Economy, Elsevier, vol. 28(2), pages 192-207.
- Mark Hallerberg, 2012. "Explaining European Patterns of Taxation: From the Introduction of the Euro to the Euro-Crisis," Research Department Publications 4777, Inter-American Development Bank, Research Department.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.