Rate Cutting Tax Reforms and Corporate Tax Competition in Europe
31 Pages Posted: 21 Apr 2008 Last revised: 14 Aug 2008
Date Written: 2008
Abstract
While there is a large and growing number of studies on the determinants of corporate tax rates, the literature has so far ignored the fact that the behavior of governments in setting tax rates is often best described as a discrete choice decision problem. We set up an empirical model that relates a government's decision whether to cut its corporate tax rate to the country's own inherited tax and taxes in neighboring countries. Using comprehensive data on corporate tax reforms in Europe since 1980, we find evidence suggesting that the position in terms of the tax burden imposed on corporate income relative to geographical neighbors strongly affects the probability of rate cutting tax reforms. Countries are particularly likely to cut their statutory tax rate if the inherited tax is high and if they are exposed to low-tax neighbors.
Keywords: tax reform, tax competition, corporate taxes
JEL Classification: H20, H25, H71
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Fiscal Interactions Among European Countries: Does the EU Matter?
-
By Christian Bellak and Markus Leibrecht
-
FDI Determination and Corporate Tax Competition in a Volatile World
By Mauro Ghinamo, Paolo M. Panteghini, ...
-
FDI and Taxation: A Meta-Study
By Lars P. Feld and Jost Heckemeyer
-
FDI and Taxation - A Meta-Study
By Lars P. Feld and Jost Heckemeyer
-
By Christian Bellak, Markus Leibrecht, ...
-
A Note on the Appropriate Measure of Tax Burden on Foreign Direct Investment to the Ceecs
By Christian Bellak and Markus Leibrecht