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Title:What drives corporate tax rates down?: a reassessment of globalization, tax competition, and dynamic adjustment to shocks PDF Logo
Authors:Overesch, Michael
Rincke, Johannes
Issue Date:2009
Series/Report no.:CESifo working paper 2535
Abstract:We reassess the driving forces behind the recent decline of corporate tax rates in Europe. Using data for up to 32 countries from 1983 to 2006, we analyze the role of economic and financial openness as well as tax competition while allowing for dynamic adjustment to shocks and period-specific as well as country-specific effects. While openness does not seem to be systematically related to corporate tax rates, our findings suggest that countries compete over statutory tax rates. In contrast, we do not find competition over effective marginal rates. While the short-run impact of tax competition on corporate tax rates seems to be modest, the interplay of tax competition and a sluggish adjustment of tax rates over time implies that permanent shocks to individual countries have substantial long-run effects on equilibrium tax levels in all countries.
Subjects:Corporate taxes
tax competition
openness
JEL:H20
H25
H71
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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