Are your firm's taxes set in Warsaw? Spatial tax competition in Europe
AbstractCorporate tax rates in Europe have been falling rapidly; as a consequence tax competition within the EU is fiercer than in the rest of the OECD. This paper analyzes heterogeneity in corporate tax rate changes between EU-15 countries as a function of the proximity to the EU-10 new member states. The average corporate tax rate in the new member states has always been considerably lower than the average in the EU-15 countries. Their entry into the EU eliminated capital barriers, in principle allowing firms to locate in one of the new EU-10 with full access to the European Market. Our results indicate that EU-15 countries physically closer to Central-Europe experienced more tax competition. Next we use a spatial regression framework to more formally test the hypothesis that distance to a low tax region affects countries' tax reaction functions.
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Bibliographic InfoPaper provided by LICOS - Centre for Institutions and Economic Performance, KU Leuven in its series LICOS Discussion Papers with number 21608.
Date of creation: 2008
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Spatial tax competition; Corporate taxes; fiscal reaction function;
Other versions of this item:
- Crabbé, Karen & VANDENBUSSCHE, Hylke, 2008. "Are your firm’s taxes set in Warsaw? Spatial tax competition in Europe," CORE Discussion Papers 2008081, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Karen, CRABBE & Hylke, VANDENBUSSCHE, 2008. "Are your firm’s taxes set in Warsaw ? Spatial tax competition in Europe," Discussion Papers (ECON - DÃ©partement des Sciences Economiques) 2008050, Université catholique de Louvain, Département des Sciences Economiques.
- Crabbé, Karen & Vandenbussche, Hylke, 2009. "Are Your Firm's Taxes Set in Warsaw? Spatial Tax Competition in Europe," CEPR Discussion Papers 7159, C.E.P.R. Discussion Papers.
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- H39 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-09-29 (All new papers)
- NEP-EEC-2008-09-29 (European Economics)
- NEP-PBE-2008-09-29 (Public Economics)
- NEP-PUB-2008-09-29 (Public Finance)
- NEP-URE-2008-09-29 (Urban & Real Estate Economics)
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