What drives the decreasing corporate tax rates? An empirical research on tax competition
Keywords:tax competition, OECD, corporate tax rate, economic integration, panel data
AbstractThis paper uses panel data from 34 OECD countries over the period 1981-2014 to find out what the determinants of corporate income tax rates are. Dividing previous literature on the topic of tax competition in three different strands, it is found that strategic fiscal interactions between countries are the main driver of corporate tax rate setting behaviour by countries. Moreover, in line with previous literature a permanent positive shock in capital mobility due to economic integration is found to decrease the statutory tax rate. Year-to-year effects in capital mobility due to openness appear to be insignificant. No evidence is found for a moderating effect of economic integration due to increased cooperation on strategic fiscal interactions.
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