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

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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:19 May 2021 02:43
      Related URLs:
      URI:https://strathprints.strath.ac.uk/id/eprint/72307
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