Resource title

Rate Cutting Tax Reforms and Corporate Tax Competition in Europe

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Resource description

While there is a large and growing number of studies on the determinants of corporate tax rates, the literature has so far ignored the fact that the behavior of governments in setting tax rates is often best described as a discrete choice decision problem. We set up an empirical model that relates a government's decision whether to cut its corporate tax rate to the country's own inherited tax and taxes in neighboring countries. Using comprehensive data on corporate tax reforms in Europe since 1980, we find evidence suggesting that the position in terms of the tax burden imposed on corporate income relative to geographical neighbors strongly affects the probability of rate cutting tax reforms. Countries are particularly likely to cut their statutory tax rate if the inherited tax is high and if they are exposed to low-tax neighbors.

Resource author

Friedrich Heinemann, Michael Overesch, Johannes Rincke

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/24723

Resource license

Adapt according to the presented license agreement and reference the original author.