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Tax Competition in an Expanding European Union

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Author Info

  • Ronald B. Davies

    ()
    (Ronald B. Davies, School of Economics, University College Dublin, Newman Building (G215), Belfield, Dublin 4, Ireland)

  • Johannes Voget

    ()
    (Johannes Voget, Mannheim University, Oxford University Centre for Business Taxation , CentER Tilburg University. L9,7, 68131 Mannheim, Germany)

Abstract

This paper empirically examines whether expansion of the EU has increased international tax competition. To do so, we use a market potential weighting scheme to estimate the slope of best responses. We find robust evidence for tax competition. In particular, our estimates suggest that EU membership affects responses with EU members responding more to the tax rates of other members. This lends credence to the above noted concerns.

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File URL: http://www.gee.min-economia.pt/RePEc/WorkingPapers/gee_papers_33.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by Gabinete de Estratégia e Estudos, Ministério da Economia e da Inovação in its series GEE Papers with number 0033.

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Length: 33 pages
Date of creation: Dec 2010
Date of revision: Jan 2011
Handle: RePEc:mde:wpaper:0033

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Keywords: Tax Competition; Foreign Direct Investment; Spatial Econometrics;

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References

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  1. Rose, Andrew K, 2003. "Which International Institutions Promote International Trade?," CEPR Discussion Papers 3764, C.E.P.R. Discussion Papers.
  2. Simon Loretz, 2008. "Corporate taxation in the OECD in a wider context," Working Papers 0821, Oxford University Centre for Business Taxation.
  3. Bruce A. Blonigen & Ronald B. Davies & Glen R. Waddell & Helen T. Naughton, 2004. "FDI in Space: Spatial Autoregressive Relationships in Foreign Direct Investment," NBER Working Papers 10939, National Bureau of Economic Research, Inc.
  4. Clemens Fuest & Bernd Huber & Jack Mintz, 2003. "Capital Mobility and Tax Competition: A Survey," CESifo Working Paper Series 956, CESifo Group Munich.
  5. Bruce A. Blonigen & Ronald B. Davies & Keith Head, 2003. "Estimating the Knowledge-Capital Model of the Multinational Enterprise: Comment," American Economic Review, American Economic Association, vol. 93(3), pages 980-994, June.
  6. Michael Devereux & Rachel Griffith, 1996. "Taxes and the location of production: evidence from a panel of US multinationals," IFS Working Papers W96/14, Institute for Fiscal Studies.
  7. Axel Dreher, 2003. "The Influence of globalization on taxes and social policy - an empirical enalysis for OECD countries," Discussion Papers 0301, Exeter University, Department of Economics.
  8. Karolina Ekholm & Rikard Forslid & James Markusen, 2003. "Export-Platform Foreign Direct Investment," NBER Working Papers 9517, National Bureau of Economic Research, Inc.
  9. Baltagi, Badi H. & Egger, Peter & Pfaffermayr, Michael, 2007. "Estimating models of complex FDI: Are there third-country effects?," Journal of Econometrics, Elsevier, vol. 140(1), pages 260-281, September.
  10. Alexander Klemm & Stefan van Parys, 2009. "Empirical Evidenceon the Effects of Tax Incentives," IMF Working Papers 09/136, International Monetary Fund.
  11. Ronald B. Davies, 2008. "Hunting High and Low for Vertical FDI," Review of International Economics, Wiley Blackwell, vol. 16(2), pages 250-267, 05.
  12. Devereux, Michael P & Lockwood, Ben & Redoano, Michela, 2002. "Do Countries Compete over Corporate Tax Rates?," CEPR Discussion Papers 3400, C.E.P.R. Discussion Papers.
  13. Thomas A. Gresik, 2001. "The Taxing Task of Taxing Transnationals," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 800-838, September.
  14. Andreas Haufler & Alexander Klemm & Guttorm Schjelderup, 2006. "Globalisation and the Mix of Wage and Profit Taxes," CESifo Working Paper Series 1678, CESifo Group Munich.
  15. Devereux, Michael P & Griffith, Rachel, 2003. "Evaluating Tax Policy for Location Decisions," International Tax and Public Finance, Springer, vol. 10(2), pages 107-26, March.
  16. Rosanne Altshuler & Timothy J. Goodspeed, 2002. "Follow the Leader? Evidence on European and U.S. Tax Competition," Departmental Working Papers 200226, Rutgers University, Department of Economics.
  17. Aisbett, Emma & Karp, Larry & McAusland, Carol, 2006. "Regulatory takings and environmental regulation in NAFTA's Chapter 11," CUDARE Working Paper Series 1014, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  18. Bruce A. Blonigen & Ronald B. Davies & Helen T. Naughton & Glen R. Waddell, 2005. "Spacey Parents: Spatial Autoregressive Patterns in Inbound FDI," NBER Working Papers 11466, National Bureau of Economic Research, Inc.
  19. James R. Markusen & Keith E. Maskus, 1999. "Discriminating Among Alternative Theories of the Multinational Enterprise," NBER Working Papers 7164, National Bureau of Economic Research, Inc.
  20. Head, Charles Keith & Mayer, Thierry, 2002. "Market Potential and the Location of Japanese Investment in the European Union," CEPR Discussion Papers 3455, C.E.P.R. Discussion Papers.
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  1. You Can Pry our 12.5% Rate from our Cold, Dead Fingers
    by Ron Davies in The Irish Economy on 2010-11-15 12:41:17
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