Are small countries leaders of the European tax competition ?
AbstractThe aim of this paper is to develop a better understanding of the literature dealing with strategic fiscal behaviours of small EU countries using estimations of tax reaction functions of competing national governments. Deriving a simple model of tax competition in a Nash and Stackelberg game, we use panel data and tools from spatial econometrics to examine the role of small countries in tax competition within the enlarged European Union. We find that interactions are stronger among smaller EU countries than between larges ones and rates set in small countries influence those in big countries. Finally, small countries located in the centre of the EU have more influence on tax policies choices of big countries than small countries located in the periphery of EU.
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Bibliographic InfoPaper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number bla08058.
Length: 28 pages
Date of creation: Oct 2008
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Strategic interactions; tax behaviours; spatial econometrics; European Union; tax competition; small countries.;
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- Michael Devereux & Simon Loretz, 2012. "What do we know about corporate tax competition?," Working Papers 1229, Oxford University Centre for Business Taxation.
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