Devereux, Michael, Lockwood, Ben and Redoano, Michela (2008) Do countries compete over corporate tax rates? Journal of Public Economics, 92 (5-6). pp. 1210-1235.
This paper tests whether OECD countries compete with each other over corporate taxes in order to attract investment. We develop two models: with firm mobility, countries compete only over the statutory tax rate or the effective average tax rate, while with capital mobility, countries compete only over the effective marginal tax rate. We estimate the parameters of reaction functions using data from 21 countries between 1983 and 1999. We find evidence that countries compete over all three measures, but particularly over the statutory tax rate and the effective average tax rate. This is consistent with a belief amongst governments that location choices by multinational firms are discrete. We also find evidence of concave reaction functions, consistent with the model outlined in the paper.
|Keywords:||Tax competition; Corporate taxes; Transfer pricing|
|Centre:||Oxford University Centre for Business Taxation|
|Date Deposited:||24 Nov 2011 09:23|
|Last Modified:||23 Oct 2015 14:06|
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