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Globalization and International Tax Competition: Empirical Evidence Based on Effective Tax Rates

Author

Listed:
  • Bretschger, Lucas

    (WIF-Institute of Economic Research)

  • Hettich, Frank

    (Infraserv GmbH & Co Höchst KG)

Abstract

Previous work showing a positive impact of globalization on capital tax revenue as a percent of GDP claims to contradict theoretical results that tax competition pressures governments to reduce taxes on highly mobile assets. However, the observed relationship is not necessarily incompatible with the predictions of tax competition literature, as the internationalization of markets also affects the capital tax base. Measuring taxes by effective tax rates instead of tax revenue for a panel of 12 OECD countries in the period 1967-96, we find that globalization has a negative impact on capital taxes, which is exactly what the theory predicts.

Suggested Citation

  • Bretschger, Lucas & Hettich, Frank, 2005. "Globalization and International Tax Competition: Empirical Evidence Based on Effective Tax Rates," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 20, pages 530-542.
    • Handle: RePEc:ris:integr:0328
    as

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    Citations

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    Cited by:

    1. Adam, Antonis & Kammas, Pantelis & Lagou, Athina, 2013. "The effect of globalization on capital taxation: What have we learned after 20years of empirical studies?," Journal of Macroeconomics, Elsevier, vol. 35(C), pages 199-209.
    2. Prof. Gheorghe Matei Ph.D, Ionuţ-Cătălin Croitoru Ph.D Student, 2011. "Globalization And Fiscal Problems," Annals of University of Craiova - Economic Sciences Series, University of Craiova, Faculty of Economics and Business Administration, vol. 4(39), pages 203-212, May.
    3. Fabian J. Baier, 2020. "Foreign Direct Investment and Tax: OECD Gravity Modelling in a World with International Financial Institutions," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 6(1), pages 45-72, October.
    4. Olena V. Sokolovska, 2016. "Race to the bottom in international tax competition: some conceptual issues," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 2(2), pages 98-110.
    5. Michael P. Devereux & Simon Loretz, 2013. "What Do We Know About Corporate Tax Competition?," National Tax Journal, National Tax Association;National Tax Journal, vol. 66(3), pages 745-774, September.
    6. Fabian J. Baier, 2019. "Foreign Direct Investment and Tax: OECD Gravity Modelling in a World with International Financial Institutions," EIIW Discussion paper disbei261, Universitätsbibliothek Wuppertal, University Library.
    7. Stacie Beck & Soodong Park, 2014. "How Fiscal Policies Reduce Labor Force Participation In Open Economies: Evidence On Tax Competition And Compensation Hypotheses," Working Papers 14-16, University of Delaware, Department of Economics.
    8. Kazim Okan Erol, 2020. "Taxation Systems in the EU: The Role of Economic Integration and Global Financial Crisis," CESifo Working Paper Series 8692, CESifo.

    More about this item

    Keywords

    Tax competition; Empirical evidence; Panel data; OECD countrie;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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