Are your 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 Katholieke Universiteit Leuven in its series Open Access publications from Katholieke Universiteit Leuven with number urn:hdl:123456789/398229.
Date of creation: 2013
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Publication status: Published in Finanz-archiv (2013) v.69, p.317-337
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Other versions of this item:
- Crabbé, Karen & Vandenbussche, Hylke, 2008. "Are your taxes set in Warsaw? Spatial tax competition in Europe," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/386123, Katholieke Universiteit Leuven.
- NEP-ALL-2013-11-22 (All new papers)
- NEP-EUR-2013-11-22 (Microeconomic European Issues)
- NEP-PUB-2013-11-22 (Public Finance)
- NEP-URE-2013-11-22 (Urban & Real Estate Economics)
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