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Why Corporate Taxes May Rise: The Case of Trade Liberalization and Foreign Ownership

Hans Jarle Kind (), Guttorm Schjelderup () and Karen Helene Ulltveit-Moe

No 3383, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Almost all the literature on tax competition in the presence of multinationals (MNCs) and profit shifting ignores trade costs. This Paper studies how economic integration, in terms of reduced trade costs and internationalization of ownership, affects tax competition and equilibrium corporate taxes. We find that equilibrium taxes increase subsequent to a reduction of trade costs if MNCs are owned by home country residents and also subsequent to increased internationalisation of ownership.

Keywords: corporate taxes; international ownership; international tax competition; multinational firms; trade liberalization (search for similar items in EconPapers)
JEL-codes: F15 F20 H20 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pol
Date: 2002-05
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