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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; Strategic behavior; taxation; tax policy; fiscal affairs; tax base; fiscal policy; tax collections; tax reform; public debt; tax reforms; foreign capital; fiscal affairs department; government fiscal deficit; fiscal rules; fiscal policies; fiscal competition; fiscal deficits; tax increases; public spending; government spending; fiscal responsibility; expenditure cuts; tax administration; tax cut; fiscal positions; fiscal pressures; budget rigidities; tax design; fiscal termites; tax policy reform; public finance; fiscal situation; tax avoidance; government expenditures; tax cuts; budget constraints; tax burden; fiscal gaps; public expenditure; government deficit;

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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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