EconPapers    
Economics at your fingertips  
 

Taxpayer Responses to Competitive Tax Policies and Tax Policy Responses to Competitive Taxpayers: Recent Evidence

Rosanne Altshuler () and Harry Grubert ()
Additional contact information
Harry Grubert: U.S. Treasury Department, Office of Tax Analysis

Departmental Working Papers from Rutgers University, Department of Economics

Abstract: We use information from the tax returns of U.S. multinational corporations to address three questions related to tax competition. First, does tax competition or company tax planning behavior better explain recent decreases in the local effective tax rates faced by U.S. multinationals investing abroad? Second, have countries become more aggressive in their use of tax concessions to attract particular types of foreign capital? And finally, has the role of taxes in the location decisions of U.S. manufacturers increased in recent years? Between 1992 and 2000, the average effective tax rate faced by U.S. manufacturers on income earned abroad fell from 25 percent to 21 percent. Our results suggest that the evolution of country effective tax rates between 1992 and 1998 seems to be driven by tax competition. Countries that lost shares of U.S. manufacturing real capital prior to 1992 cut their rates the most over this period. However, the most recent data suggests that companies may not need tax competition to lower effective tax burdens abroad. The evolution of country effective rates between 1998 and 2000 seems to be driven by company rather than country behavior. This is consistent with the introduction of the “check the box” regulations in 1997 which made it easier for corporations to use “self-help” to lower tax burdens. Interestingly, we find that countries were rewarding more mobile companies and those that were perceived to be more beneficial to the local economy with tax concessions as far back as 1984. Finally, although not conclusive, our empirical work suggests that U.S. manufacturers may have become more sensitive to differences in local tax rates across countries in recent years.Length: 20 pages

Keywords: tax competition; multinational corporations; effective tax rates; international taxation (search for similar items in EconPapers)
JEL-codes: H20 H25 H87 (search for similar items in EconPapers)
Date: 2004-03-01
New Economics Papers: this item is included in nep-acc and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20) Track citations by RSS feed

Downloads: (external link)
http://www.sas.rutgers.edu/virtual/snde/wp/2004-06.pdf (application/pdf)

Related works:
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:rut:rutres:200406

Access Statistics for this paper

More papers in Departmental Working Papers from Rutgers University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2020-01-27
Handle: RePEc:rut:rutres:200406