Do countries compete over corporate tax rates?
Devereux, M. P., Lockwood, Ben and Redoano, Michela (2002) Do countries compete over corporate tax rates? Discussion Paper. London: Centre for Economic Policy Research (Great Britain). Discussion paper (Centre for Economic Policy Research (Great Britain)) (No.340).
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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 1983-99. 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.
|Item Type:||Working or Discussion Paper (Discussion Paper)|
|Subjects:||H Social Sciences > HJ Public Finance|
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||Corporations -- Taxation, Competition, Taxation -- Mathematical models, International trade -- Taxation|
|Series Name:||Discussion paper (Centre for Economic Policy Research (Great Britain))|
|Publisher:||Centre for Economic Policy Research (Great Britain)|
|Place of Publication:||London|
|Official Date:||May 2002|
|Number of Pages:||54|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
|Funder:||Economic and Social Research Council (Great Britain) (ESRC), University of Warwick. Centre for the Study of Globalisation and Regionalisation (CSGR)|
|Realised As:||Devereux, M.P., Lockwood, B. and Redoano, M. (2008). Do countries compete over corporate tax rates? Journal of Public Economics, 92(5-6), pp. 1210-1235. http://wrap.warwick.ac.uk/id/eprint/30109|
|Version or Related Resource:||Devereux, M.P., Lockwood, B. and Redoano, M. (2002). Do countries compete over corporate tax rates? [Coventry] : University of Warwick, Economics Department. (Warwick economic research papers, no.642). http://wrap.warwick.ac.uk/id/eprint/1548|
Anselin, L., K. Bera, R. Florax, M. Yoon, (1996) “Simple diagnostic tests for spatial dependence,” Regional Science and Urban Economics, 26, 77-104.
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