Do Countries Compete over Corporate Tax Rates?
|Speaker:||Ben Lockwood, University of Warwick|
|Date:||Wednesday 24 April 2002|
|Location:||Room 106 Streatam Court|
(with Michael P. Devereux and Michela Redoano)
This paper tests whether 21 OECD countries compete with each other over corporate taxes in order to attract investment. We examine the statutory tax rate, the effective average tax rate and the effective marginal tax rate in each country. We find evidence that countries compete over all three measures, but particularly over the statutory tax rate and the effective average tax rate. This is consistent with a belief amongst governments that location choices by multinational firms are discrete. We also find evidence of non-linear reaction functions, consistent with a simple model outlined in the paper.