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Tax Competition in an Expanding European Union

Author

Listed:
  • Ronald B. Davies

    (University College Dublin)

  • Johannes Voget

    (Oxford University Centre for Business Taxation)

Abstract
This paper empirically examines whether expansion of the EU has increased international tax competition. To do so, we use a simple model of tax competition to determine how a given country weights the taxes of others when choosing its own tax. This indicates that the market potential of a country (which includes both domestic consumption and exports) is the appropriate weight. This is an improvement on the ad-hoc and often endogenous weighting schemes used elsewhere. Unlike those studies, we find robust evidence for tax competition. In particular, our estimates suggest that EU membership affects responses with EU members responding more to the tax rates of other members. This lends credence to the above-noted concerns.

Suggested Citation

  • Ronald B. Davies & Johannes Voget, 2008. "Tax Competition in an Expanding European Union," Working Papers 0830, Oxford University Centre for Business Taxation.
    • Handle: RePEc:btx:wpaper:0830
    as

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    References listed on IDEAS

    as
    1. Bruce A. Blonigen & Ronald B. Davies & Keith Head, 2003. "Estimating the Knowledge-Capital Model of the Multinational Enterprise: Comment," American Economic Review, American Economic Association, vol. 93(3), pages 980-994, June.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Corporate taxation; Tax Competition; European Union;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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