DO COUNTRIES COMPETE OVER CORPORATE TAX RATES?

Michael Devereux, Ben Lockwood and Michela Redoano ()

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: This paper tests whether OECD countries compete with each other over corporate taxes in order to attract investment. We develop two models: with …rm mobility, countries compete only over the statutory tax rate or the e¤ective average tax rate, while with capital mobility, countries compete only over the e¤ective marginal tax rate. We estimate the parameters of reaction functions using data from 21 countries between 1983 and 1999. We …nd evidence that countries compete over all three measures, but particularly over the statutory tax rate and the e¤ective average tax rate. This is consistent with a belief amongst governments that location choices by multinational …rms are discrete. We also …nd evidence of concave reaction functions, consistent with the model outlined in the paper.

Keywords: tax competition; corporate taxes; effective average tax rate; effective marginal tax rate (search for similar items in EconPapers)
JEL-codes: H0 H25 H77 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (134)

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https://warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp642.pdf

Related works:
Journal Article: Do countries compete over corporate tax rates? (2008)
Working Paper: Do Countries Compete over Corporate Tax Rates? (2002)
Working Paper: Do Countries Compete over Corporate Tax Rates? (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:642

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