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Title:Testing the tax competition theory : how elastic are national tax bases in OECD countries? PDF Logo
Authors:Riedl, Aleksandra
Rocha-Akis, Silvia
Issue Date:2009
Series/Report no.:CESifo working paper 2669
Abstract:To what extent do countries' corporate income tax (CIT) rates attract foreign tax bases? What are the revenue implications of a unilateral tax reduction when tax bases are internationally mobile? These questions are explored using a panel of annual data from 17 OECD countries spanning the period 1982 to 2005. We find significant international fiscal externalities in the form of CIT-induced resource flows. The magnitude, however, indicates that the extent of international corporate tax base mobility is rather modest. Moreover, we find that, on average, a unilateral CIT reduction results in a less-than-proportional increase in the CIT base, thus reducing CIT revenues. The results are robust across a wide range of specifications and point to potential gains from international tax policy coordination.
Subjects:tax competition
corporate income tax base elasticity
instrumental variables
international fiscal externalities
Laffer curve
panel data estimation
JEL:H71
H77
H87
C23
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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