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Tax Competition in the European Union – Evidence from Panel Data

Author

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  • Mara (Nandra), Eugenia Ramona

Abstract

After the last EU enlargement the problem of tax competition is more complex and this article tries to reflect the amplitude of this phenomenon. Some factors have a positive influence of tax competition and one of this is capital mobility, but others have a negative impact like public debt or budget deficit. Using a panel data for EU countries, analyzed on 1995-2004, we find significant correlations between the implicit tax rate of business income and corporation profits and the budget deficit, public debt, GDP per capita and the degree of openness of countries, the last variable is used as a proxy for capital mobility. The tax competition is specific only for direct taxation and for this reason we choose as dependent variables an indicator which is reflecting the effective tax burden on business income and corporations profits - the implicit tax rate of business income and corporations profits. The main conclusion is that every EU member states have a different degree of tax competition and this degree is limited by the EU requires concerning the budget deficit which have not exceed 3% of GDP and 60% for public debt.

Suggested Citation

  • Mara (Nandra), Eugenia Ramona, 2007. "Tax Competition in the European Union – Evidence from Panel Data," MPRA Paper 21082, University Library of Munich, Germany, revised 2007.
  • Handle: RePEc:pra:mprapa:21082
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    File URL: https://mpra.ub.uni-muenchen.de/21082/1/MPRA_paper_21082.pdf
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    References listed on IDEAS

    as
    1. Boss, Alfred, 1999. "Do we need tax harmonization in the EU?," Kiel Working Papers 916, Kiel Institute for the World Economy (IfW).
    2. Fredrik Andersson & Rikard Forslid, 2003. "Tax Competition and Economic Geography," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 279-303, April.
    3. George Halkos & Nickolas Kyriazis, 2006. "Is tax competition harmful and is the EU an optimal tax area?," European Journal of Law and Economics, Springer, vol. 21(2), pages 163-177, April.
    4. Signe Krogstrup, 2003. "A Synthesis of Recent Developments in the Theory of Capital Tax Competition," EPRU Working Paper Series 04-02, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    tax competition; panel analysis; harmonization; tax burden;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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