Testing the Tax Competition Theory: How Elastic are National Tax Bases in Western Europe?

This paper tests new implications of the asymmetric tax competition model on diesel excise taxes. We extend the standard tax competition model by replacing the unit demand assumption with iso-elastic demand. As a result, not only the level of the equilibrium tax, but also the slope of the tax reaction function depends positively on the size of the country. The new implication is tested on panel data in first differences for 16 countries of Western Europe. The results provide strong evidence for strategic interaction in the setting of diesel excises and confirm the effect of country size on the response to tax changes in neighbouring countries. Strategic interaction between EU countries intensified in the mid-1990s and drove small European countries to set lower diesel tax rates. These results explain why the EU’s minimum tax policy has failed to harmonise diesel tax rates.

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Valstybių konkurencijos mokesčiais apraiškų teisiniai aspektai

Teisė ◽

10.15388/teise.2009.0.278 ◽

2009 ◽

Vol 72 ◽

pp. 141-159

Author(s):

M Indaugas Lukas

Keyword(s):

Tax Competition ◽

Legal Analysis ◽

Tax Revenues ◽

International Tax Competition ◽

Tax Systems ◽

International Tax ◽

National Tax ◽

Harmful Effects

Straipsnyje analizuojama tarpvalstybinė konkurencija tiesioginiais mokesčiais, tipinės jos formos ir valstybių taikomi būdai riboti neigiamus konkurencijos mokesčiais padarinius nacionalinėms mokestinėms pajamoms, siekiant atskleisti, jog konkurencijos mokesčiais fenomenas, nepaisant itin aiškaus politizuotumo, gali ir turi būti ir teisės mokslo interesų sritis. Suvokiant, kad išsami teisinė šio itin sudėtingo ir daugialypio reiškinio ar jį identifikuojančių elementų analizė tokios apimties darbe neįmanoma, čia bandoma iš teisinių perspektyvų įvertinti aktualiausius ir reikšmingiausius nacionalinėms mokesčių sistemoms tiesiogiai darančius įtaką valstybių konkurencijai mokesčiais aspektus, bandant prisidėti prie kryptingos tolesnės teisinės diskusijos. In this article phenomenon of international tax competition, typical its forms and measures to counter its harmful effects on national tax revenues are analyzed, trying to reveal, that, despite deep political nature, international tax competition might and should be in the scope of interests of tax lawyers. Realizing, that in such article it is not possible to provide comprehensive legal analysis, author seeks in legal light to introduce relevant and most important aspects of tax competition phenomenon that directly influences national tax systems, trying to encourage further legal discussion.

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Fiscal (Tax) Sovereignty and Its Scope in Integration Bodies

Journal of Russian Law ◽

10.12737/1206 ◽

2013 ◽

Vol 1 (11) ◽

pp. 41-51

Author(s):

Инна Хаванова ◽

Inna Khavanova

Keyword(s):

Tax Competition ◽

Tax Law ◽

National Tax

The author analyses the matter of the fiscal (tax) sovereignty, tax jurisdiction, tax competition of the states, defines trends in development of the tax sovereignty and its borders in the course of integration. The article reveals some problems of the interaction of the international and national tax law.

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Income Shifting, Investment, and Tax Competition: Theory and Evidence from Provincial Taxation in Canada

SSRN Electronic Journal ◽

10.2139/ssrn.282317 ◽

2001 ◽

Author(s):

Jack Mintz ◽

Michael Smart

Keyword(s):

Tax Competition ◽

Income Shifting ◽

Competition Theory

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Transfer pricing in a function of abusing tax competition instruments

Skola biznisa ◽

10.5937/skolbiz1-22224 ◽

2020 ◽

pp. 137-161

Author(s):

Ljiljana Tanasić ◽

Teodor Petrović

Keyword(s):

Tax Competition ◽

Transfer Pricing ◽

Gain Control ◽

Developed Countries ◽

Control Mechanisms ◽

Tax Rate ◽

Transfer Prices ◽

National Tax ◽

Suitable Area ◽

And Control

The paper focuses on elucidating transfer pricing as a means of tax competition instruments misuse. Tax competition instruments have a key role in creating national tax attractiveness for foreign direct investment. However, in order to protect the local tax base on the basis of abuse of tax competition instruments, a large number of countries apply the principle of sources of income, i.e. taxation of business profits made by a non-resident legal entity exclusively in the country where the business was conducted and revenue generated. But with the process of globalization and the expansion of multinational companies, i.e. related legal entities, the instruments of tax competition have remained a suitable area of legally permitted transfer of profits through the application of transfer pricing. The data presented in the paper indicate that, although the trend of global corporate tax rate (as the dominant instrument of tax competition) has a downward trajectory, there are still fluctuations in rates between countries around the world, including the existing inconsistencies and ambiguities of national tax regulations. Taking this into account, the aim of the paper was to emphasize that transfer prices, through the instruments of tax competition, have threatened the economic, social, and tax stability of individual countries for more than two decades. The paper shows that developed countries have managed, to a certain extent, to gain control over their application by introducing more aggressive tax audits of transfer pricing. However, special attention is paid to developing countries which remain an active source of tax competition instruments abuse through the inadequate application of transfer pricing, due to the lack of adequate regulatory and control mechanisms, financial and human resources, and efforts to attract foreign investment through various instruments of tax competition.

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