A Partial Race to the Bottom; Corporate Tax Developments in Emerging and Developing Economies
This paper assembles a new dataset on corporate income tax regimes in 50 emerging and developing economies over 1996-2007 and analyzes their impact on corporate tax revenues and domestic and foreign investment. It computes effective tax rates to take account of complicated special regimes, such as partial tax holidays, temporarily reduced rates and increased investment allowances. There is evidence of a partial race to the bottom: countries have been under pressure to lower tax rates in order to lure and boost investment. In the case of standard tax systems (i.e. tax rules applying under normal circumstances), the effective tax rate reductions have not been larger than those witnessed in advanced economies, and revenues have held up well over the sample period. However, a race to the bottom is evident among special regimes, most notably in the case of Africa, creating effectively a parallel tax system where rates have fallen to almost zero. Regression analysis reveals higher tax rates adversely affect domestic investment and FDI, but do raise revenues in the short-run.
|Date of creation:||01 Jan 2012|
|Contact details of provider:|| Postal: International Monetary Fund, Washington, DC USA|
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
|Order Information:||Web: http://www.imf.org/external/pubs/pubs/ord_info.htm|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Devereux, Michael P & Griffith, Rachel, 2003.
"Evaluating Tax Policy for Location Decisions,"
International Tax and Public Finance,
Springer;International Institute of Public Finance, vol. 10(2), pages 107-126, March.
- Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
- Alexander D Klemm, 2008. "Effective Average Tax Rates for Permanent Investment," IMF Working Papers 08/56, International Monetary Fund.
- A. Klemm & S. Van Parys, 2010.
"Empirical Evidence on the Effects of Tax Incentives,"
Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium
10/673, Ghent University, Faculty of Economics and Business Administration.
- Alexander Klemm & Stefan Parys, 2012. "Empirical evidence on the effects of tax incentives," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(3), pages 393-423, June.
- Alexander D Klemm & Stefan van Parys, 2009. "Empirical Evidenceon the Effects of Tax Incentives," IMF Working Papers 09/136, International Monetary Fund.
- Michael Keen & Mario Mansour, 2010. "Revenue Mobilisation in Sub-Saharan Africa: Challenges from Globalisation II - Corporate Taxation," Development Policy Review, Overseas Development Institute, vol. 28(5), pages 573-596, 09.
- Ruud A. de Mooij & Sjef Ederveen, 2008.
"Corporate Tax Elasticities A Reader’s Guide to Empirical Findings,"
0822, Oxford University Centre for Business Taxation.
- Ruud A. de Mooij & Sjef Ederveen, 2008. "Corporate tax elasticities: a reader's guide to empirical findings," Oxford Review of Economic Policy, Oxford University Press, vol. 24(4), pages 680-697, winter.
- Hines, James R. Jr., 1999. "Lessons From Behavioral Responses to International Taxation," National Tax Journal, National Tax Association, vol. 52(2), pages 305-322, June.
- R Blundell & Steven Bond, "undated".
"Initial conditions and moment restrictions in dynamic panel data model,"
W14&104., Economics Group, Nuffield College, University of Oxford.
- Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
- Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
- Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
- Fuest, Clemens & Huber, Bernd & Mintz, Jack, 2005.
"Capital mobility and tax competition,"
Munich Reprints in Economics
20329, University of Munich, Department of Economics.
- Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(2), pages 269-304, June.
- Michael P. Devereux & Rachel Griffith & Alexander Klemm, 2002. "Corporate income tax reforms and international tax competition," Economic Policy, CEPR;CES;MSH, vol. 17(35), pages 449-495, October.
- Eckhard Janeba & Michael Smart, 2001.
"Is Targeted Tax Competition Less Harmful than its Remedies?,"
CESifo Working Paper Series
590, CESifo Group Munich.
- Janeba, Eckhard & Smart, Michael, 2003. "Is Targeted Tax Competition Less Harmful Than Its Remedies?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(3), pages 259-280, May.
- Zee, Howell H. & Stotsky, Janet G. & Ley, Eduardo, 2002. "Tax Incentives for Business Investment: A Primer for Policy Makers in Developing Countries," World Development, Elsevier, vol. 30(9), pages 1497-1516, September.
- Mintz, Jack M, 1990. "Corporate Tax Holidays and Investment," World Bank Economic Review, World Bank Group, vol. 4(1), pages 81-102, January.
- Alexander D Klemm, 2009.
"Causes, Benefits, and Risks of Business Tax Incentives,"
IMF Working Papers
09/21, International Monetary Fund.
- Alexander Klemm, 2010. "Causes, benefits, and risks of business tax incentives," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 17(3), pages 315-336, June.
- Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
- repec:ntj:journl:v:52:y:1999:i:n._2:p:305-22 is not listed on IDEAS
- Kimberly Clausing, 2007. "Corporate tax revenues in OECD countries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(2), pages 115-133, April.
- repec:ntj:journl:v:52:y:1999:i:n._2:p:269-304 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:12/28. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow)or (Hassan Zaidi)
If references are entirely missing, you can add them using this form.