Rate Cutting Tax Reforms and Corporate Tax Competition in Europe

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ZEW Discussion Papers ; No. 08-028

Classification and Topics

• Classification: Wirtschaft ; Business Taxes and Subsidies including sales and value-added (VAT) ; Taxation, Subsidies, and Revenue: General ; State and Local Taxation, Subsidies, and Revenue
• Subject: Tax reform ; tax competition ; corporate taxes ; Körperschaftsteuer ; Steuerreform ; Unternehmensbesteuerung ; Steuertarif ; Steuerwettbewerb ; Diskrete Entscheidung ; Europa

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Heinemann, Friedrich ; Overesch, Michael ; Rincke, Johannes
• Event: Veröffentlichung
• (who): Zentrum für Europäische Wirtschaftsforschung (ZEW)
• (where): Mannheim
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/24723
• Last update: 10.03.2025, 11:43 AM CET