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Corporate Tax Competition in the EU 25. An Empirical Investigation of the "Race-to-the-Bottom" Hypothesis

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  • Vanessa Mühlböck
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    This working paper examines whether the EU countries are in a race-to-the-bottom competition with regard to their corporate taxes. An empirical model is used to determine whether such a race is actually on, i.e., whether states reduce their taxation of capital income in response to increasing capital mobility. The model includes not just capital mobility but also other factors that are assumed to impact on the intensity of tax competition, such as the size of a country and its economic importance compared to its competitors. Although the results did not correspond to the theoretical model, it is still not possible to reject the race-to-the-bottom hypothesis so that the existence of competition cannot be excluded when it comes to corporate taxes.

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    Paper provided by WIFO in its series WIFO Working Papers with number 328.

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    Length: 37 pages
    Date of creation: 21 Aug 2008
    Handle: RePEc:wfo:wpaper:y:2008:i:328
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