Why the Current Tax Rate Tells You Little: Competing for Mobile and Immobile Firms

Dominika Langenmayr and Martin Simmler

No 6827, CESifo Working Paper Series from CESifo

Abstract: Firms should use all available information to anticipate future tax rates. Firm mobility, as a key determinant of corporate tax rates, is one such source of information. We first show theoretically that a government sets a higher tax rates on firm profits if average firm mobility in its jurisdiction is low, and that the potential entry of immobile firms in the future deters firms from entering a jurisdiction today. We then test and confirm these predictions in a well-identified setting, using the rapid growth of wind power plants (a very immobile industry) and the large variation in local business taxes across Germany for identification.

Keywords: corporate taxation; firm mobility; commitment; tax competition (search for similar items in EconPapers)
JEL-codes: F21 H25 H71 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-bec and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp6827.pdf (application/pdf)

Related works:
Working Paper: Why the Current Tax Rate Tells You Little: Competing For Mobile and Immobile Firms (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_6827

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().