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Tax Competition in an Expanding European Union

Author

Listed:
  • Ronald B. Davies

    () (Ronald B. Davies, School of Economics, University College Dublin, Newman Building (G215), Belfield, Dublin 4, Ireland)

  • Johannes Voget

    () (Johannes Voget, Mannheim University, Oxford University Centre for Business Taxation , CentER Tilburg University. L9,7, 68131 Mannheim, Germany)

Abstract

This paper empirically examines whether expansion of the EU has increased international tax competition. To do so, we use a market potential weighting scheme to estimate the slope of best responses. We find robust evidence for tax competition. In particular, our estimates suggest that EU membership affects responses with EU members responding more to the tax rates of other members. This lends credence to the above noted concerns.

Suggested Citation

  • Ronald B. Davies & Johannes Voget, 2010. "Tax Competition in an Expanding European Union," GEE Papers 0033, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Jan 2011.
    • Handle: RePEc:mde:wpaper:0033
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    File URL: http://www.gee.gov.pt/RePEc/WorkingPapers/gee_papers_33.pdf
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    References listed on IDEAS

    as
    1. Bruce A. Blonigen & Ronald B. Davies & Keith Head, 2003. "Estimating the Knowledge-Capital Model of the Multinational Enterprise: Comment," American Economic Review, American Economic Association, vol. 93(3), pages 980-994, June.
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    5. Andreas Haufler & Alexander Klemm & Guttorm Schjelderup, 2006. "Globalisation and the Mix of Wage and Profit Taxes," CESifo Working Paper Series 1678, CESifo Group Munich.
    6. Dreher, Axel, 2006. "The influence of globalization on taxes and social policy: An empirical analysis for OECD countries," European Journal of Political Economy, Elsevier, vol. 22(1), pages 179-201, March.
    7. Markusen, James R & Maskus, Keith E, 2002. "Discriminating among Alternative Theories of the Multinational Enterprise," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 694-707, November.
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    12. Devereux, Michael P. & Lockwood, Ben & Redoano, Michela, 2008. "Do countries compete over corporate tax rates?," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1210-1235, June.
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    More about this item

    Keywords

    Tax Competition; Foreign Direct Investment; Spatial Econometrics;

    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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