Has Tax Competition Emerged in OECD Countries? Evidence from Panel Data

Winner, Hannes

doi:10.1007/s10797-005-2915-0

Cited by 133 publications

(120 citation statements)

References 48 publications

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“…Finally, as there is a number of papers that uses more indirect measures of globalization, such as the Sachs-Werner openness index, the covered interest parity or the savings-investment correlation (see e.g. Slemrod, 2003;Winner 2005;Garrett and Mitchell, 2001) we construct a forth dummy variable (denoted as Indirect) which equals to one when one of the three above mentioned indirect globalization measures is employed and takes a value of zero otherwise.…”

Section: Meta-sample and Methodologymentioning

confidence: 99%

“…Specifically, it is believed that studies employing effective tax rates, tend to verify a negative impact of globalization on capital tax rates (see e.g. Bretschger and Hettich, 2005;Winner, 2005;Bretschger, 2010) while studies relying on tax capital revenues (either as a share of GDP or as a percentage of total taxation) tend to confirm a positive impact of market integration on capital taxation (e.g. Garrett, 1995;Quinn, 1997;Swank, 1998).…”

Section: Do Capital Taxation Measures Matter?mentioning

confidence: 99%

“…Garrett, 1995;Quinn, 1997;Swank, 1998) whereas another strand provide empirical evidence of a negative impact of globalization on capital tax rates (see e.g. Bretschger and Hettich, 2002;Winner, 2005;Bretschger, 2010).…”

Section: Introductionmentioning

confidence: 99%

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The effect of globalization on capital taxation: What have we learned after 20years of empirical studies?

Adam

Kammas

Lagou

2013

Journal of Macroeconomics

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This paper applies meta-regression analysis to the empirical literature that examines the impact of international market integration on capital taxation. The main objective is to explore whether particular data, model specification and estimation procedures exert systematic impact on the reported findings. Our results provide empirical evidence that differences across studies can be attributed to differences in the measurement of globalization. Moreover, in contrast to the conventional wisdom, study characteristics related to the measurement of the tax burden on capital appear to have an insignificant effect on the above mentioned relationship. Finally the meta-analysis fails to confirm a negative effect of globalization on the taxation of capital. JEL: F2, H2, H4. Keywords: capital mobility; tax competition; Meta analysis Acknowledgments: We are indebted to Thanasis Lapatinas and Spyros Symeonides for valuable suggestions and discussions. We have benefited from comments by Nikos Benos, Michael Chletsos, Manthos Delis, Anastasis Litina, Nikos Mylonides, Nikos Tsakiris as well as the participants at the seminar series of the University of Ioannina Any remaining errors are ours.

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Section: Meta-sample and Methodologymentioning

confidence: 99%

Section: Do Capital Taxation Measures Matter?mentioning

confidence: 99%

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The effect of globalization on capital taxation: What have we learned after 20years of empirical studies?

Adam

Kammas

Lagou

2013

Journal of Macroeconomics

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“…Rather, it suggests that governments use corporate tax cuts as a device to reduce unemployment by attracting new firms (Haufler and 24 Comparing the absolute magnitude of this 6.98% difference with other findings in the literature is not straightforward since studies addressing how trade integration affects tax competition and corporate income tax rates do not generally differentiate between its effect on large and small countries (e.g. Swank and Steinmo, 2002;Winner, 2005;Devereux et al, 2008;Rincke and Overesch, 2011). Genschel and Schwartz (2011, 356) provide the only partial exception.…”

Section: ---Figure 2 About Here ---mentioning

confidence: 96%

Trade integration and corporate income tax differentials

Exbrayat

Geys

2013

Int Tax Public Finance

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Building on recent contributions to the New Economic Geography literature, this paper analyses the relation between asymmetric market size, trade integration and corporate income tax differentials across countries. First, relying on Ottaviano and Van Ypersele's (2005) footloose capital model of tax competition, we illustrate that trade integration reduces the importance of relative market size for differences in the extent of corporate taxation between countries. Then, using a dataset of 26 OECD countries over the period 1982-2004, we provide supportive evidence of these theoretical predictions: i.e., market size differences are strongly positively correlated with corporate income tax differences across countries but, crucially, trade integration weakens this link. These findings are obtained controlling for the potential endogeneity of trade integration and are robust to alternative specifications. 2 "You've had a broad substantial reduction in corporate tax rates outside the US. That occurs at a time when it's much easier (...) for companies to shift investment and income to take advantage of lower tax rates overseas. (...) To have a more competitive system, you want to try to bring down the rate closer to the range of our major trading partners." (Timothy Geithner, former US Treasury Secretary, Wall Street Journal, 28-30 January 2011, 9) IntroductionLooking at the evolution of corporate tax rates in developed countries over the last three decades, two observations stand out. The first is a decline in corporate tax rates (Figure 1, (Figure 1, right-hand side). ---Figure 1 about here ---Recent studies indicate the importance of such tax differences for firm location or FDI flows (Bénassy-Quéré et al., 2005;Kammas, 2011;Brülhart et al., 2012). Empirical analyses aimed at understanding what allows some countries to sustain higher tax rates than others have, however, not followed suit. 2 Yet, such insights can have important policy implications.1 This decline is also present when looking only at countries that were OECD members throughout the 1982-2011 period. 2 While numerous studies analyse the decline in corporate tax rates (Devereux et al., 2002(Devereux et al., , 2008Davies and Voget, 2008), Gilbert et al. (2005) is the only study analysing the determinants of corporate tax rate differentials. Compared to that study, we provide a firmer theoretical rationale for the analysis, address potential endogeneity problems, control for the influence of various country-level variables, and employ a Our results support theoretical predictions from Ottaviano and Van Ypersele (2005) and Haufler and Wooton (2010). Specifically, we show that the tax gap responds positively to population size (and GDP) differences between countries and, crucially, that this relationship is significantly attenuated by trade integration. Our analysis thereby controls for the endogeneity of standard measures of trade integration by extracting the level of trade liberalisation between each country-pair from a gravity equation (Rose ...

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“…Recent empirical research has addressed the important issue of corporate income taxation in a context of globalisation and perfect capital mobility (Devereux et al [19], [20], Bretschger and Hettich [6], Markusen [32], Rodrik [42], Slemrod [43], Winner [45], Haufler et al [25]). The liberalization of foreign exchange laws that occurred in most OECD countries in the mid and late 1980s basically implied free mobility of capital and generated a sharp rise in FDI and multinational activity, creating the conditions for international tax competition for mobile capital.…”

Section: Introductionmentioning

confidence: 99%

FDI determination and corporate tax competition in a volatile world

Ghinamo¹,

Panteghini

Revelli³

2009

Int Tax Public Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper investigates the role of economic and political volatility in the process of corporate tax-rate determination. The article is based on a theoretical framework that allows for the ability of multinational firms to choose the optimal timing of foreign investment and to shift profits by transfer pricing, and provides an empirical analysis on a large panel data set of countries over the 1983-2003 period. First, a reduced-form dynamic equation of corporate tax rate determination is estimated by the generalised method of moments (GMM), where a country's top statutory corporate tax rate depends on a number of measures of economic and political volatility. The fundamental testable prediction derived from the theoretical model is that increased volatility should reduce a country's corporate tax rate. Our results support the hypothesis that economic volatility is associated with lower top statutory corporate tax rates, while our measures of political volatility have no significant impact on corporate taxation policy. In order to identify the channels through which volatility works, we also estimate a structural model allowing for simultaneous determination of the corporate tax rate and the inflow of FDI to a particular country. The estimates of the structural model show that economic volatility affects the corporate tax setting process through their impact on FDI inflow. Terms of use: Documents inJEL Code: C23, F23, H87.

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Has Tax Competition Emerged in OECD Countries? Evidence from Panel Data

Cited by 133 publications

References 48 publications

The effect of globalization on capital taxation: What have we learned after 20years of empirical studies?

The effect of globalization on capital taxation: What have we learned after 20years of empirical studies?

Trade integration and corporate income tax differentials

FDI determination and corporate tax competition in a volatile world

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