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New Forms of Tax Competition in the European Union: An Empirical Investigation

Author

Listed:
  • Eloi Flamant
  • Sarah Godar
  • Gaspard Richard

Abstract

This report provides an empirical analysis of tax competition between individuals and firms in the European Union. We find that tax competition increasingly takes the form of preferential or narrowly targeted tax regimes in addition to general rate reductions. We provide a ranking of the most harmful regimes targeting foreigners, primarily high-income or high-wealth individuals. We also discuss several options for dealing with these trends.

Suggested Citation

  • Eloi Flamant & Sarah Godar & Gaspard Richard, 2021. "New Forms of Tax Competition in the European Union: An Empirical Investigation," Reports 003, EU Tax Observatory.
    • Handle: RePEc:dbp:report:003
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    References listed on IDEAS

    as
    1. Wilson, John Douglas & Wildasin, David E., 2004. "Capital tax competition: bane or boon," Journal of Public Economics, Elsevier, vol. 88(6), pages 1065-1091, June.
    2. Zodrow, George R, 2003. "Tax Competition and Tax Coordination in the European Union," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(6), pages 651-671, November.
    3. Henrik Jacobsen Kleven & Camille Landais & Esben Schultz, 2014. "Migration and Wage Effects of Taxing Top Earners: Evidence from the Foreigners' Tax Scheme in Denmark," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(1), pages 333-378.
    4. Ufuk Akcigit & Salomé Baslandze & Stefanie Stantcheva, 2016. "Taxation and the International Mobility of Inventors," American Economic Review, American Economic Association, vol. 106(10), pages 2930-2981, October.
    5. European Commission, 2020. "Taxation trends in the European Union: 2020 edition," Taxation trends 2020, Directorate General Taxation and Customs Union, European Commission.
    6. Javier Garcia-Bernardo & Petr Janský & Thomas Tørsløv, 2022. "Decomposing Multinational Corporations’ Declining Effective Tax Rates," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 70(2), pages 338-381, June.
    7. Katarzyna Anna Bilicka, 2019. "Comparing UK Tax Returns of Foreign Multinationals to Matched Domestic Firms," American Economic Review, American Economic Association, vol. 109(8), pages 2921-2953, August.
    8. European Commission, 2018. "Taxation trends in the European Union: 2018 edition," Taxation trends 2018, Directorate General Taxation and Customs Union, European Commission.
    9. European Commission, 2021. "Taxation trends in the European Union: 2021 edition," Taxation trends 2020, Directorate General Taxation and Customs Union, European Commission.
    10. Spengel, Christoph & Schmidt, Frank & Heckemeyer, Jost H. & Nicolay, Katharina & Bartholmeß, Alexandra & Ludwig, Christopher & Steinbrenner, Daniela & Buchmann, Peter & Bührle, Anna Theresa & Dutt, Ve, 2020. "Effective tax levels using the Devereux/Griffith methodology," ZEW Expertises, ZEW - Leibniz Centre for European Economic Research, number 231440.
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    Citations

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    Cited by:

    1. Alejandro Esteller-Moré & Umberto Galmarini, 2023. "Optimal Tax Administration Responses to Fake Mobility and Underreporting," Working Papers 2023/03, Institut d'Economia de Barcelona (IEB).
    2. Bührle, Anna Theresa & Nicolay, Katharina & Spengel, Christoph & Wickel, Sophia, 2023. "From corporate tax competition to global cooperation? Trends, prospects and effects on German family businesses," ZEW Discussion Papers 23-027, ZEW - Leibniz Centre for European Economic Research.
    3. Lisa Marie Timm & Massimo Giuliodori & Paul Muller, 2022. "Tax incentives for high skilled migrants: evidence from a preferential tax scheme in the Netherlands," Tinbergen Institute Discussion Papers 22-068/V, Tinbergen Institute.
    4. Süreyya Yilmaz Ozekenci & Cansu Unver Erbas & Suzan Dsouza, 2025. "ESG Resilience Amid Financial Distress: the Role of Board Gender Diversity in EU Firms," Prague Economic Papers, Prague University of Economics and Business, vol. 2025(4), pages 470-494.
    5. Lisa Marie Timm & Massimo Giuliodori & Paul Muller, 2025. "Tax Incentives for Migrants with Mid-level Earnings: Evidence from the Netherlands," American Economic Journal: Applied Economics, American Economic Association, vol. 17(3), pages 42-79, July.
    6. repec:hpe:journl:y:2025:v:253:i:2:p:91-127 is not listed on IDEAS
    7. Advani, Arun & Burgherr, David & Summers, Andy, "undated". "Taxation and Migration by the Super-Rich," CAGE Online Working Paper Series 630, Competitive Advantage in the Global Economy (CAGE).
    8. Jules Ducept & Sarah Godar, 2025. "Declining Effective Tax Rates of Multinationals: The Hidden Role of Tax Base Reforms," Working Papers 030, EU Tax Observatory.
    9. MIHÄ‚ILÄ‚, Nicoleta, 2021. "Globalization, Tax Policy And Tax Havens. Some Critical Considerations," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 25(4), pages 71-87, December.
    10. Olgica Glava Ki & Marina Beljiä†, 2026. "Tax Policy and FDI Effects on Economic Growth: A DCCE Analysis of European OECD Economies," Hacienda Pública Española / Review of Public Economics, IEF, vol. 256(1), pages 105-131, March.

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    Keywords

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    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls

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