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Corporate tax competition between firms

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  • Loretz, Simon

    ()
    (Oxford University Centre for Business Taxation)

  • Moore, Padraig J.

    (Deutsche Bank; London)

Abstract

Firms' tax planning decisions, similar to their other operational decisions, are made in a competitive environment. Various stakeholders observe the tax payments and evaluate these against the relevant peer group, which creates interdependencies in the tax planning activities of firms. Introducing the concept of reputational loss we show the positive interdependence in a theoretical model and test it in a spatial econometric model. Empirical evidence suggests that benchmarking takes place both within countries and within industries, however for the latter it is important to include firms in large non-EU OECD countries. Further, the analysis shows that spatial interdependence is stronger for the largest firms and if they have an average e ffective tax rate above the statutory tax rate.

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Bibliographic Info

Paper provided by University of Salzburg in its series Working Papers in Economics and Finance with number 2009-3.

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Length: 29 pages
Date of creation: 11 Nov 2009
Date of revision:
Handle: RePEc:ris:sbgwpe:2009_003

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Keywords: Corporate Taxation; Benchmarking; Tax Competition; Spatial Econometrics;

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References

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Cited by:
  1. Christian J. Bauer & Dominika Langenmayr, 2011. "Sorting into Outsourcing: Are Profits Taxed at a Gorilla's Arm's Lenght?," Working Papers 104, Bavarian Graduate Program in Economics (BGPE).
  2. Bauer, Christian & Langenmayr, Dominika, 2011. "Sorting into Outsourcing: Are Pro ts Taxed at a Gorilla's Arm's Length?," Discussion Papers in Economics 12311, University of Munich, Department of Economics.

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