Abstract

http://ssrn.com/abstract=1345685
 
 

References (22)



 
 

Citations (2)



 


 



Are Your Firm's Taxes Set in Warsaw? Spatial Tax Competition in Europe


Karen Crabbe


KU Leuven - Department of Economics

Hylke Vandenbussche


Catholic University of Leuven (KUL), LICOS & CEPR

February 2009

CEPR Discussion Paper No. DP7159

Abstract:     
Tax competition within the EU is fiercer than in the rest of the OECD with tax rates falling rapidly. This paper analyzes tax responses of EU-15 countries to corporate tax changes in the EU-10 new member states as a function of their proximity to these new member states. The average corporate tax rate in the new member states has always been considerably lower than the average in the EU-15 countries. Their entry into the EU eliminated capital barriers, allowing firms to locate in one of the new EU-10 with full access to the European Market. Our results indicate that EU-15 countries geographically closer to the new member states respond stronger to corporate tax changes in these new member states. We use a theoretical and a spatial regression framework to test the hypothesis that distance to a low tax region intensifies countries' tax reaction functions.

Number of Pages in PDF File: 29

Keywords: corporate taxes, fiscal reaction function, Spatial tax competition

JEL Classification: H25, H39, H77

working papers series


Date posted: February 18, 2009  

Suggested Citation

Crabbe, Karen and Vandenbussche, Hylke, Are Your Firm's Taxes Set in Warsaw? Spatial Tax Competition in Europe (February 2009). CEPR Discussion Paper No. DP7159. Available at SSRN: http://ssrn.com/abstract=1345685

Contact Information

Karen Crabbe
KU Leuven - Department of Economics ( email )
Leuven, B-3000
Belgium
Hylke Vandenbussche (Contact Author)
Catholic University of Leuven (KUL), LICOS & CEPR ( email )
Faculty of Economics
Naamsestraat 69
B-3000 Leuven, 3000
Belgium
+32 16 326 920 (Phone)
+32 16 326 732 (Fax)
HOME PAGE: http://www.econ.kuleuven.be/public/NDBAD40/
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