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Redistributive taxation, multinational enterprises, and economic integration

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  • Haufler, Andreas
  • Klemm, Alexander
  • Schjelderup, Guttorm

Abstract

Increased activity of multinational firms exposes national corporate tax bases to cross-country profit shifting, but also leads to rising profitability of the corporate sector. We incorporate these two effects of economic integration into a simple political economy model where the median voter decides on a redistributive income tax rate. In this setting economic integration may raise or lower the equilibrium tax rate, and it is more likely to raise the tax rate of a low-tax country. The implications of the model are consistent with the empirical observations that effective corporate tax rates have not fallen in all OECD countries, and that corporate tax revenues have generally risen.

Suggested Citation

  • Haufler, Andreas & Klemm, Alexander & Schjelderup, Guttorm, 2008. "Redistributive taxation, multinational enterprises, and economic integration," European Journal of Political Economy, Elsevier, vol. 24(1), pages 249-255, March.
  • Handle: RePEc:eee:poleco:v:24:y:2008:i:1:p:249-255
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    Cited by:

    1. Dirk Schindler & Guttorm Schjelderup, 2009. "Harmonization of Corporate Tax Systems and Its Effect on Collusive Behavior," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(4), pages 599-621, August.
    2. Lutz Preuss, 2012. "Responsibility in Paradise? The Adoption of CSR Tools by Companies Domiciled in Tax Havens," Journal of Business Ethics, Springer, vol. 110(1), pages 1-14, September.
    3. Manmohan S. Kumar & Dennis P. Quinn, 2012. "Globalization and Corporate Taxation," IMF Working Papers 12/252, International Monetary Fund.
    4. Giuranno, Michele G., 2010. "Pooling sovereignty under the subsidiary principle," European Journal of Political Economy, Elsevier, vol. 26(1), pages 125-136, March.
    5. Florence TOUYA, 2016. "Horizontal and Vertical Tax Interactions in a Common Agency Game," Working Papers 2015-2016_12, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Aug 2016.
    6. Michela Redoano, 2007. "Fiscal Interactions Among European Countries. Does the EU Matter?," CESifo Working Paper Series 1952, CESifo Group Munich.
    7. Ronald B. Davies, 2012. "CCCTB 4 EU? SA vs. FA w/ FTA," Working Papers 201224, School of Economics, University College Dublin.
    8. Florence TOUYA, 2016. "EU tax competition and tax avoidance: A multiprincipal perspective," Working Papers 2015-2016_11, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Aug 2016.
    9. Ronald B. Davies, 2013. "Tariff-induced transfer pricing and the CCCTB," Working Papers 201314, School of Economics, University College Dublin.
    10. Lai, Yu-Bong, 2010. "The political economy of capital market integration and tax competition," European Journal of Political Economy, Elsevier, vol. 26(4), pages 475-487, December.
    11. Redoano, Michela, 2014. "Tax competition among European countries. Does the EU matter?," European Journal of Political Economy, Elsevier, vol. 34(C), pages 353-371.
    12. Yu-Bong Lai, 2014. "Asymmetric tax competition in the presence of lobbying," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(1), pages 66-86, February.

    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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