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Taxing Mobile Capital and Profits: The Nordic Welfare States

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  • Guttorm Schjelderup

Abstract

This paper discusses trends in capital taxation and the role of the corporate tax rate in a welfare state. It provides a summary of the tax competition literature with special application to capital taxation in small versus large countries. A main finding from this literature is that small countries set lower taxes on capital than large countries. In line with this prediction the paper shows that the Nordic countries undertook tax reforms in the 1990s, which lead to lower ratios of statutory corporate to wage taxes than in most OECD countries. The second part of the paper is devoted to tax base erosion by multinationals and how to combat it. Finally, the paper offers some concluding remarks on redistribution and the pressures of tax competition.

Suggested Citation

  • Guttorm Schjelderup, 2015. "Taxing Mobile Capital and Profits: The Nordic Welfare States," CESifo Working Paper Series 5603, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_5603
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp5603.pdf
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    References listed on IDEAS

    as
    1. Dharmapala, Dhammika & Riedel, Nadine, 2013. "Earnings shocks and tax-motivated income-shifting: Evidence from European multinationals," Journal of Public Economics, Elsevier, pages 95-107.
    2. Jennifer Blouin & Harry Huizinga & Luc Laeven & Gaëtan Nicodème, 2013. "Thin capitalization rules and multinational firm capital structure," Working Papers 1323, Oxford University Centre for Business Taxation.
    3. Bartelsman, Eric J. & Beetsma, Roel M. W. J., 2003. "Why pay more? Corporate tax avoidance through transfer pricing in OECD countries," Journal of Public Economics, Elsevier, pages 2225-2252.
    4. Gresik, Thomas A. & Schindler, Dirk & Schjelderup, Guttorm, 2015. "The Effect of Tax Havens on Host Country Welfare," Discussion Papers 2015/19, Norwegian School of Economics, Department of Business and Management Science.
    5. Bucovetsky, Sam & Wilson, John Douglas, 1991. "Tax competition with two tax instruments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 333-350, November.
    6. Christian Bjørnskov, 2012. "How Does Social Trust Affect Economic Growth?," Southern Economic Journal, Southern Economic Association, vol. 78(4), pages 1346-1368, April.
    7. Rolf Aaberge & Anthony B. Atkinson & Jørgen Modalsli, 2013. "The ins and outs of top income mobility," Discussion Papers 762, Statistics Norway, Research Department.
    8. Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
    9. Buettner, Thiess & Overesch, Michael & Schreiber, Ulrich & Wamser, Georg, 2012. "The impact of thin-capitalization rules on the capital structure of multinational firms," Journal of Public Economics, Elsevier, vol. 96(11), pages 930-938.
    10. Biglaiser, Gary & Mezzetti, Claudio, 1997. "Politicians' decision making with re-election concerns," Journal of Public Economics, Elsevier, vol. 66(3), pages 425-447, December.
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. 25/1/16: Nordic Model: Not Too Heavy Handed on Corporate Profits
      by Constantin Gurdgiev in True Economics on 2016-01-25 22:16:00

    More about this item

    Keywords

    capital taxation; profit shifting; government policies;

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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