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Corporate Taxation and the Impact of Governance, Political and Economic Factors

  • Marcel Gérard
  • Fernando M.M. Ruiz

In this paper we first use two international data sets to investigate how governance, political and economic factors influence corporate tax rates. We show that institutional and political factors matter: good governance reduces the tax rate; a parliamentary system, especially a plurality election system, and religious or nationalist executives too, push tax rates upward. Traditional variables also matter: economic openness has a negative effect on tax rates although market size has a positive one. Though it is not robust, interaction among neighbors also plays a role. Then we turn to theory and extend a standard model of tax competition to provide a channel for the elements set forth so far to influence tax rates formation; nested in the economic theory of lobbying that exercise provides our empirical investigation with theoretical foundations.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2904.

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Date of creation: 2009
Date of revision:
Handle: RePEc:ces:ceswps:_2904
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  1. European Commission, 2001. "Company Taxation in the Internal Market," Taxation Studies 0005, Directorate General Taxation and Customs Union, European Commission.
  2. Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
  3. Lorz, Jens Oliver, 1996. "Capital mobility, tax competition, and lobbying for redistributive capital taxation," Kiel Working Papers 779, Kiel Institute for the World Economy.
  4. Freille, Sebastian & Haque, Mohammad Emranul & Kneller, Richard Anthony, 2007. "Federalism, decentralisation and corruption," MPRA Paper 27535, University Library of Munich, Germany.
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