Business, Management and Accounting
4 years ago

Countries in fierce competition to attract investment through corporate tax rates.

Do Countries Compete over Corporate Tax Rates
Michael Devereux, Ben Lockwood, Michela Redoano

Paper Summary

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Countries around the world compete with each other over corporate tax rates to attract investment. Researchers studied data from 21 countries between 1983-99 and found that countries compete over different tax rates, especially the statutory tax rate and the effective average tax rate. This competition is driven by the belief that multinational companies make location decisions based on tax rates. The study also found that countries' responses to changes in tax rates are not linear, but rather follow a curved pattern.