Is international tax competition only about taxes? A market-based perspective

Azémar, Céline and Desbordes, Rodolphe and Wooton, Ian (2020) Is international tax competition only about taxes? A market-based perspective. Journal of Comparative Economics, 48 (4). pp. 891-912. ISSN 0147-5967 (https://doi.org/10.1016/j.jce.2020.05.002)

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Abstract

This paper revisits tax competition among governments for foreign direct investment (FDI) by considering the role played by the economic dynamism of competitors on the setting of corporate tax rates (CTRs). Using a database with worldwide coverage over the period 1995-2014, we find that strong growth performance of neighbouring countries is associated with a lower CTR, especially in developed countries. This spatial effect is particularly manifest if competing countries are large and open to capital flows. These results appear to hold in most regions of the world and suggest that governments perceive foreign economic dynamism as a threat, leading them to reduce their CTRs to maintain their FDI attractiveness.

ORCID iDs

Azémar, Céline, Desbordes, Rodolphe ORCID logoORCID: https://orcid.org/0000-0001-8923-5401 and Wooton, Ian ORCID logoORCID: https://orcid.org/0000-0001-5084-6379;
  • Item type:Article
    ID code:72307
    Dates:
    Date
    Event
    31 December 2020
    Published
    6 June 2020
    Published Online
    13 May 2020
    Accepted
    Keywords:tax competition, country size, foreign direct investment, developing countries, free-trade zones, spatial lag, Economic Theory, Economics and Econometrics
    Subjects:Social Sciences > Economic Theory
    Department:Strathclyde Business School > Economics
    Depositing user: Pure Administrator
    Date deposited:07 May 2020 11:48
    Last modified:07 Jun 2022 00:33
    Related URLs:
    URI:https://strathprints.strath.ac.uk/id/eprint/72307
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