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The Disappearing Tax Base

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Author Info

  • Reint Gropp
  • Kristina Kostial

Abstract

This paper analyzes the link between FDI, corporate taxation, and corporate tax revenues. We find strong evidence that FDI in (out) flows are affected by tax regimes in the host (home) countries and FDI flows in turn affect the corporate tax base. Simulations of European Union (EU) harmonization (isolating the revenue effect of FDI on the tax base from direct effects through the rate harmonization) suggest that high (low) tax countries would gain (lose) revenue from harmonization; these effects may be substantial. Our results also suggest that EU tax harmonization would significantly affect the net FDI position of some countries.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 00/173.

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Length: 39
Date of creation: 01 Oct 2000
Date of revision:
Handle: RePEc:imf:imfwpa:00/173

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Related research

Keywords: Tax bases; Foreign direct investment; Revenues; Income taxes; Corporate taxes; corporate tax; tax rate; tax revenues; corporate income tax; corporate tax rate; corporate tax rates; tax countries; corporate tax revenues; tax competition; tax revenue; revenue elasticity; income tax revenues; corporate income tax revenues; corporate tax revenue; direct investment; tax harmonization; home country; high tax countries; tax policy; statutory tax rate; investors; country taxation; retained earnings; tax systems; income tax rates; corporate tax base; income tax rate; effective tax rates; statutory corporate tax rates; tax regime; home country taxation; tax liabilities; tax journal; tax reform; income shifting; low-tax countries; tax changes; interest payments; tax elasticity; tax sensitivity; harmful ? tax; domestic taxes; business taxation; tax change; investment decisions; high-tax countries; harmful tax competition; domestic taxation; high corporate tax rates; effects of taxation; tax liability; capital stock; corporate taxation; national tax journal; multinational firms; harmful tax; tax coordination; harmful ? tax competition; effects of tax policy; investment incentives; foreign tax; average tax rate; corporate income taxes; effects of taxes; tax avoidance; tax legislation; tax haven affiliates; corporate tax systems; corporate tax bases; high tax rates; multinational corporate decision making; tax payments; tax profitability; tax rate changes; tax rate reductions; cost of capital; lower tax rates; rates of return; tax measures; international tax; foreign taxes; level of taxation; tax planning; investment flows; regressive tax; capacity utilization; international taxation;

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Citations

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Cited by:
  1. Roberta De Santis & Maria Cristina Mercuri & Claudio Vicarelli, 2001. "Taxes and Location of Foreign Direct Investments: an Empirical Analysys for the European Union Countries," ISAE Working Papers 24, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
  2. Feld, Lars P. & Ruf, Martin & Scheuering, Uwe & Schreiber, Ulrich & Voget, Johannes, 2013. "Effects of territorial and worldwide corporation tax systems on outbound M&As," Freiburg Discussion Papers on Constitutional Economics 13/11, Walter Eucken Institut e.V..
  3. Kimberly Clausing, 2007. "Corporate tax revenues in OECD countries," International Tax and Public Finance, Springer, vol. 14(2), pages 115-133, April.
  4. Kenneth G. Stewart & Michael C. Webb, 2003. "Capital Taxation, Globalization, and International Tax Competition," Econometrics Working Papers 0301, Department of Economics, University of Victoria.
  5. Görg, Holger & Molana, Hassan & Montagna, Catia, 2009. "Foreign direct investment, tax competition and social expenditure," International Review of Economics & Finance, Elsevier, vol. 18(1), pages 31-37, January.
  6. Barry, Frank, 2003. "Tax Policy, FDI and the Irish Economic Boom of the 1990s," Economic Analysis and Policy (EAP), Queensland University of Technology (QUT), School of Economics and Finance, vol. 33(2), pages 221-236, September.
  7. Frank Barry and Rosemary Healy-Rae, 2008. "FDI Implications of Recent European Court of Justice Decision on Corporation Tax Matters," The Institute for International Integration Studies Discussion Paper Series iiisdp270, IIIS.
  8. Agnès Bénassy-Quéré & Lionel Fontagné & Amina Lahrèche-Révil, 2005. "How Does FDI React to Corporate Taxation?," International Tax and Public Finance, Springer, vol. 12(5), pages 583-603, September.
  9. Assaf Razin & Efraim Sadka, 2007. "Productivity and Taxes as Drivers of FDI," NBER Working Papers 13094, National Bureau of Economic Research, Inc.
  10. Peter J. Mullins, 2006. "Moving to Territoriality? Implications for the United States and the Rest of the World," IMF Working Papers 06/161, International Monetary Fund.
  11. Květa Kubátová & Lucie Říhová, 2009. "Regression analysis of factors influencing corporate tax revenues in OECD countries," Politická ekonomie, University of Economics, Prague, vol. 2009(4), pages 451-470.

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