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Why Corporate Taxes May Rise: The Case of Trade Liberalization and Foreign Ownership

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  • Kind, Hans Jarle
  • Schjelderup, Guttorm
  • Ulltveit-Moe, Karen-Helene

Abstract

Almost all the literature on tax competition in the presence of multinationals (MNCs) and profit shifting ignores trade costs. This Paper studies how economic integration, in terms of reduced trade costs and internationalization of ownership, affects tax competition and equilibrium corporate taxes. We find that equilibrium taxes increase subsequent to a reduction of trade costs if MNCs are owned by home country residents and also subsequent to increased internationalisation of ownership.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3383.

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Date of creation: May 2002
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Handle: RePEc:cpr:ceprdp:3383

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Related research

Keywords: corporate taxes; international ownership; international tax competition; multinational firms; trade liberalization;

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References

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  1. Michael Keen, 1993. "The welfare economics of tax co-ordination in the European Community : a survey," Fiscal Studies, Institute for Fiscal Studies, vol. 14(2), pages 15-36, February.
  2. Hines, James R. Jr., 1999. "Lessons from Behavioral Responses to International Taxation," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 305-22, June Cita.
  3. Thomas A. Gresik, 2001. "The Taxing Task of Taxing Transnationals," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 800-838, September.
  4. Haufler, Andreas & Schjelderup, Guttorm, 2000. "Corporate Tax Systems and Cross Country Profit Shifting," Oxford Economic Papers, Oxford University Press, vol. 52(2), pages 306-25, April.
  5. Eckard Janeba, . "Tax Competition in Imperfectly Competitive Markets," Discussion Paper Serie A 513, University of Bonn, Germany.
  6. Huizinga, Harry & Nielsen, Soren Bo, 1997. "Capital income and profit taxation with foreign ownership of firms," Journal of International Economics, Elsevier, vol. 42(1-2), pages 149-165, February.
  7. Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany.
  8. Konan, Denise Eby, 1997. "Strategic taxation of the multinational enterprise: A new argument for double taxation," Journal of Public Economics, Elsevier, vol. 63(2), pages 301-309, January.
  9. Kashif S. Mansori & Alfons J. Weichenrieder, 2001. "Tax Competition and Transfer Pricing Disputes," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 58(1), pages 1-, December.
  10. Elitzur, Ramy & Mintz, Jack, 1996. "Transfer pricing rules and corporate tax competition," Journal of Public Economics, Elsevier, vol. 60(3), pages 401-422, June.
  11. Alfons Weichenrieder, 1996. "Fighting international tax avoidance," Fiscal Studies, Institute for Fiscal Studies, vol. 17(1), pages 37-58, February.
  12. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June Cita.
  13. Jack M. Mintz & Michael Smart, 2001. "Income Shifting, Investment, and Tax Competition: Theory and Evidence from Provincial Taxation in Canada," International Tax Program Papers 0402, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto, revised Apr 2003.
  14. Haufler, Andreas & Wooton, Ian, 1999. "Country size and tax competition for foreign direct investment," Journal of Public Economics, Elsevier, vol. 71(1), pages 121-139, January.
  15. Kant, Chander, 1990. "Multinational firms and government revenues," Journal of Public Economics, Elsevier, vol. 42(2), pages 135-147, July.
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Cited by:
  1. AMERIGHI, Oscar, 2004. "Transfer pricing and enforcement policy in oligopolistic markets," CORE Discussion Papers 2004069, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. PERALTA, Susana & WAUTHY , Xavier & van YPERSELE, Tanguy, 2003. "Should countries control international profit shifting ?," CORE Discussion Papers 2003072, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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