Title

Does recent empirical evidence support the existence of international corporate tax competition?

Document Type

Journal article

Source Publication

Journal of International Accounting, Auditing and Taxation

Publication Date

6-1-2006

Volume

15

Issue

1

First Page

16

Last Page

31

Keywords

FDI, Tax co-ordination, Tax competition

Abstract

Recent reductions in institutional barriers to international investment have meant that the existence of international corporate tax differentials is now one of the most significant remaining causes of distortion to the optimum global allocation of resources, and hence to international trade. In the debate as to how to reduce such distortion, two main schools of thought have emerged. The first believes that this result can be achieved primarily through the international co-ordination of corporate taxes. To date, efforts in this direction have not made significant progress. The second contends that market forces, through tax competition, will spontaneously reduce international corporate tax differentials. In this article, an analysis of recent trends in corporate tax rates supports this second contention: statutory and effective corporate tax rates are continuing to decline and converge. However, recent tax revenue data give little support for the existence of tax competition; the expected shift in the tax burden from corporate profits onto less mobile factors such as labor has largely failed to materialize. Several explanations for these contrasting findings are outlined and analyzed.

DOI

10.1016/j.intaccaudtax.2006.01.002

Print ISSN

10619518

E-ISSN

18791603

Publisher Statement

Copyright © 2006 Elsevier Inc

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Full-text Version

Publisher’s Version

Recommended Citation

Simmons, R. S. (2006). Does recent empirical evidence support the existence of international corporate tax competition? Journal of International Accounting, Auditing & Taxation, 15(1), 16-31. doi: 10.1016/j.intaccaudtax.2006.01.002