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Redistributive taxation, multinational enterprises, and economic integration

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  • Haufler, Andreas

    ()
    (Department of Economics, University of Munich)

  • Klemm, Alexander

    ()
    (Fiscal Affairs Dept., International Monetary Fund (IMF))

  • Schjelderup, Guttorm

    ()
    (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)

Abstract

Increased activity of multinational firms exposes national corporate tax bases to cross-country profit shifting, but also leads to rising profitability of the corporate sector. We incorporate these two effects of economic integration into a simple political economy model where the median voter decides on a redistributive income tax rate. In this setting economic integration may raise or lower the equilibrium tax rate, and it is more likely to raise the tax rate of a low-tax country. The implications of the model are consistent with the empirical observations that effective corporate tax rates have not fallen in all OECD countries, and that corporate tax revenues have generally risen.

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Bibliographic Info

Paper provided by Department of Business and Management Science, Norwegian School of Economics in its series Discussion Papers with number 2008/4.

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Length: 14 pages
Date of creation: 12 Mar 2008
Date of revision:
Handle: RePEc:hhs:nhhfms:2008_004

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Postal: NHH, Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Phone: +47 55 95 92 93
Fax: +47 55 95 96 50
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Web page: http://www.nhh.no/en/research-faculty/department-of-business-and-management-science.aspx
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Keywords: Redistributive taxation; profit shifting;

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  1. Mintz, Jack & Smart, Michael, 2004. "Income shifting, investment, and tax competition: theory and evidence from provincial taxation in Canada," Journal of Public Economics, Elsevier, vol. 88(6), pages 1149-1168, June.
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  3. Persson, Torsten & Tabellini, Guido, 1992. "The Politics of 1992: Fiscal Policy and European Integration," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 59(4), pages 689-701, October.
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  6. Richard E. Baldwin & Paul Krugman, 2002. "Agglomeration, Integration and Tax Harmonization," NBER Working Papers 9290, National Bureau of Economic Research, Inc.
  7. Hannes Winner, 2005. "Has Tax Competition Emerged in OECD Countries? Evidence from Panel Data," International Tax and Public Finance, Springer, Springer, vol. 12(5), pages 667-687, September.
  8. Slemrod, Joel, 2004. "Are corporate tax rates, or countries, converging?," Journal of Public Economics, Elsevier, vol. 88(6), pages 1169-1186, June.
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  12. Gottschalk, Silke & Peters, Wolfgang, 2003. "Redistributive Taxation in the Era of Globalization," International Tax and Public Finance, Springer, Springer, vol. 10(4), pages 453-68, August.
  13. Bretschger, Lucas & Hettich, Frank, 2002. "Globalisation, capital mobility and tax competition: theory and evidence for OECD countries," European Journal of Political Economy, Elsevier, vol. 18(4), pages 695-716, November.
  14. Michael Devereux & Rachel Griffith & Alexander Klemm, 2004. "Why has the UK corporation tax raised so much revenue?," Fiscal Studies, Institute for Fiscal Studies, vol. 25(4), pages 367-388, December.
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  16. Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, Peterson Institute for International Economics, number 57, July.
  17. Fuest, Clemens, 2005. "Economic integration and tax policy with endogenous foreign firm ownership," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1823-1840, September.
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  19. Desai, Mihir A. & Hines, James R. Jr., 2004. "Old Rules and New Realities: Corporate Tax Policy in a Global Setting," National Tax Journal, National Tax Association, vol. 57(4), pages 937-60, December.
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Citations

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Cited by:
  1. Lutz Preuss, 2012. "Responsibility in Paradise? The Adoption of CSR Tools by Companies Domiciled in Tax Havens," Journal of Business Ethics, Springer, Springer, vol. 110(1), pages 1-14, September.
  2. Redoano, Michela, 2012. "Fiscal Interactions Among European Countries: Does the EU Matter?," CAGE Online Working Paper Series, Competitive Advantage in the Global Economy (CAGE) 102, Competitive Advantage in the Global Economy (CAGE).
  3. Manmohan S. Kumar & Dennis P. Quinn, 2012. "Globalization and Corporate Taxation," IMF Working Papers 12/252, International Monetary Fund.
  4. Ronald B Davies, 2012. "CCCTB 4 EU? SA vs. FA w/ FTA," Working Papers, School Of Economics, University College Dublin 201224, School Of Economics, University College Dublin.
  5. Giuranno, Michele G., 2010. "Pooling sovereignty under the subsidiary principle," European Journal of Political Economy, Elsevier, vol. 26(1), pages 125-136, March.
  6. Lai, Yu-Bong, 2010. "The political economy of capital market integration and tax competition," European Journal of Political Economy, Elsevier, vol. 26(4), pages 475-487, December.
  7. Yu-Bong Lai, 2014. "Asymmetric tax competition in the presence of lobbying," International Tax and Public Finance, Springer, Springer, vol. 21(1), pages 66-86, February.

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