The Political Economy of Corporate Tax Harmonization - Why Do European Politicians (Dis)Like Minimum Tax Rates?
46 Pages Posted: 19 Jan 2009
Date Written: 2008
Setting minimum tax rates is a well discussed way of mitigating pressure from tax competition. This paper investigates which motives shape the support for a minimum corporate tax among politicians. We make use of a unique data base: a survey among members of the European parliament. Our results confirm that the politicians' ideology as well as individual characteristics such as educational background exert a major in influence. Moreover, several predictions regarding national interests are derived from various standard tax competition models. These hypotheses are partly supported by the data; in particular, different national preferences for social equality shape the support. A comparison with survey results from the German Bundestag reveals that German politicians on the national level do not show different preferences towards tax rate harmonization.
Keywords: company taxation, tax harmonization, political economy, European Parliament
JEL Classification: D78, H25, H87
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