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Globalization and Corporate Taxation

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  • Manmohan S. Kumar
  • Dennis P. Quinn
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    Abstract

    This paper analyzes the extent to which the degree of international economic integration, both financial and trade, affects corporate tax rates. It explores this issue in the context of strategic behavior by countries, taking into account other global and domestic political economy factors. Tax rates are analyzed using a unique tax dataset for advanced and developing economies extending over five decades. We report a number of novel results: there is no general negative relationship between financial globalization and corporate tax rates and revenues—results vary according to country grouping with OECD countries showing a positive relationship; the United States exhibits a “Stackelberg†type of leadership on other countries; trade integration is inversely correlated with tax rates; and public sentiment and ideology affect tax rates. The policy implications of these findings, particularly given budgetary pressures in the aftermath of the global crisis, are noted.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/252.

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    Length: 49
    Date of creation: 22 Oct 2012
    Date of revision:
    Handle: RePEc:imf:imfwpa:12/252

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    Related research

    Keywords: Globalization; Economic integration; Trade integration; Corporate taxes; Tax revenues; Tax rates; Economic models; Corporate tax rates; Tax revenues; Globalization; Strategic behavior;

    This paper has been announced in the following NEP Reports:

    References

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    Cited by:
    1. Janeba, Eckhard & Osterloh, Steffen, 2013. "Tax and the city — A theory of local tax competition," Journal of Public Economics, Elsevier, vol. 106(C), pages 89-100.

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