Title: The International Corporate Tax Competition: How Do Countries Interact With Each Other
Abstract: Corporate tax rates have been significantly decreased, especially in the OECD countries in the past thirty years. In 1980, the average federal level corporate top statutory tax rate in the OECD countries was 42.35%, and in 1990, this number was 36.35%. In 2010, this number has been decreased to less than 25%. Many economists (Slemrod, 2004; Winner, 2005; Schwarz, 2007; Devereux et al., 2008; Bellak and Leibrecht, 2009) investigate the causes, as well as the consequences of the decreasing corporate tax rate trend. The purpose of this paper is to provide a comprehensive study of the causes of corporate tax rate changes by investigating the OECD countries first, and then extending to other developing countries.
This dissertation contains three chapters. Chapter I documents the evolution of corporate tax policies in OECD countries. Chapter II studies international corporate tax competition within OECD countries. It focuses on controlling the effects of common shocks on strategic interactions with respect to corporate tax policies. Chapter III includes corporate tax policies of developing countries and investigates two questions. First, how do neighboring countries interact with each other regarding corporate top statutory tax rate (TSR)? Second, which countries are more likely to be leaders and which countries are more likely to be followers in international corporate tax competition setting?
The first chapter evaluates various aspects of corporate tax evolution in OECD countries. Corporate tax policy changes not only include changes in corporate tax rates, but also changes in corporate tax bases, as well as the changes in corporate tax structures. These changes differ across countries as well as through time. Despite the differences, however, there are several common features in OECD countries’ corporate tax policy changes.
First of all, corporate tax rates in all OECD counties have been reduced. In contrast, the corporate tax bases have been broadened. The countries, such as Portugal, Finland, and Greece, had higher corporate tax rates than the other OECD countries at the beginning of the sample period, 1981, and also experienced larger corporate tax rate reductions. Second, most of the OECD countries impose a straight-forward corporate tax structure. More than half of the OECD countries do not collect local corporate tax. Also, most of the OECD countries implement a flat instead of progressive corporate tax rate structure. Third, in all OECD countries, corporate tax revenues only account for a small fraction of the total tax revenues, as well as GDP.
The second chapter uses panel spatial analysis to study strategic interactions in OECD countries with respect to corporate tax rates. The data includes 21 developed countries which joined the OECD before 1980, for the period from 1981 to 2011. The main contribution of this chapter is analyzing the importance of accounting for common shocks which may have differential impacts on countries. To do this, I adopt the double clustering method proposed by Thompson (2011),…
Publication Year: 2014
Publication Date: 2014-01-01
Language: en
Type: article
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Cited By Count: 1
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