Tax competition in an expanding European Union

Ronald Davies and Johannes Voget

No 200904, Working Papers from School of Economics, University College Dublin

Abstract: This paper empirically examines whether expansion of the EU has increased international tax competition. To do so, we use a simple model of tax competition to determine how a given country weights the taxes of others when choosing its own tax. This indicates that the market potential of a country (which includes both domestic consumption and exports) is the appropriate weight. This is an improvement on the adhoc and often endogenous weighting schemes used elsewhere. Unlike those studies, we find robust evidence for tax competition. In particular, our estimates suggest that EU membership affects responses with EU members responding more to the tax rates of other members. This lends credence to the above-noted concerns.

Keywords: Taxation--European Union countries; European Union--Membership; Intergovernmental tax relations (search for similar items in EconPapers)
JEL-codes: F1 H2 H7 (search for similar items in EconPapers)
Date: 2008-11
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Citations: View citations in EconPapers (56)

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http://hdl.handle.net/10197/2600 First version, 2008 (application/pdf)

Related works:
Working Paper: Tax Competition in an Expanding European Union (2011)
Working Paper: Tax Competition in an Expanding European Union (2009)
Working Paper: Tax Competition in an Expanding European Union (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ucn:wpaper:200904

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