The Tax Calculus of Corporate Locational Decisions
University of Illinois College of Business Department of Accountancy
August 1, 2013
Berkeley Journal of International Law (BJIL), Vol. 32, No. 2, 2014
This paper addresses the chief arguments in favor of restricting tax competition. Taking into account standard economic theory relating to the selection criteria for public goods and the risk-shifting features of the income tax, it is not surprising that the empirical evidence does not support the prevailing notion that tax competition will lead to a "race to the bottom" in the taxation of mobile factors. The view that tax competition necessitates an erosion of the tax base fails to articulate the actual effects of tax-motivated corporate locational decisions on the fiscal systems of the developed world. By restructuring their tax systems to more closely align with a normative income tax which does not place non-economic limits on the use of losses, developed nations will continue to attract business investment while, and perhaps more importantly, allowing developing nations to compete for capital and investment.
Number of Pages in PDF File: 30
Date posted: September 8, 2013 ; Last revised: May 30, 2015