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How elastic are national corporate income tax bases in OECD countries? The role of domestic and foreign tax rates

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  • Aleksandra Riedl
  • Silvia Rocha-Akis

Abstract

To what extent do reductions in corporate income tax (CIT) rates attract foreign tax bases? What are the revenue implications of a unilateral tax reduction when tax bases are internationally mobile? These questions are explored using annual data from 17 OECD countries spanning the period 1982 to 2005. Controlling for fixed country effects, year effects, and country time trends, and subjecting our results to an extensive robustness analysis, we find (i) a country's aggregate reported corporate profits are negatively and significantly affected by CIT rate reductions in neighbouring countries; (ii) a unilateral reduction in the domestic CIT rate results in lower domestic CIT revenues.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 45 (2012)
Issue (Month): 2 (May)
Pages: 632-671

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Handle: RePEc:cje:issued:v:45:y:2012:i:2:p:632-671

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Cited by:
  1. Godar, Sarah & Paetz, Christoph & Truger, Achim, 2014. "Progressive tax reform in OECD countries : perspectives and obstacles," ILO Working Papers 485510, International Labour Organization.
  2. Enrico Colombatto, 2012. "Fiscal Harmonization: Credible Goal or Trojan Horse?," Working papers 010, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
  3. Leoš Vítek, 2013. "Corporate Income Taxation and the Corporate Tax Base in the Czech Republic," Český finanční a účetní časopis, University of Economics, Prague, vol. 2013(2).

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