Are Corporate Tax Rates, or Countries, Converging?
The statutory rate and effective tax rate imposed on corporation income—as well as the dispersion of these rates—began to decline in the 1980s. Is this due to changes in the domestic determinants of corporate taxation or increases in international pressures for tax competition? This paper finds clear evidence that the corporate tax rate is insulated from a country’s revenue needs: across countries, there is no association of the expenditure–GDP ratio with the corporate statutory rate and only weak evidence of a positive association with the average rate. There is suggestive, but not definitive, evidence that the domestic role of the corporate tax as a backstop to the individual income tax is important: across countries, there is indeed a strong association between the top individual rate and the top statutory corporate rate. There is intriguing evidence about the role of international competitive pressures on corporate taxation. Measures of openness are negatively associated with statutory corporate rates, although not with revenues collected as a fraction of GDP. Strikingly, larger, more trade-intensive countries do
collect more corporate tax, but this may be because these countries are more attractive venues for investment.
Are Corruption and Taxation Really Harmful to Growth? Firm Level Evidence
Raymond Fisman and Jakob Svensson
Corporate Tax Avoidance and Firm Value
Corporate Tax Effects on the Quality and Quantity of FDI
Do Complicated Tax Systems Prevent Foreign Direct Investment?
The negative relationship between tax rates and FDI is well known. This paper looks at how complexity of the tax system affects FDI. Fulfilling tax requirements can be time-consuming, and this implies a cost for more complex tax systems. Alternatively, complexity may provide opportunities to reduce the overall tax bill. We find that measures of tax complexity have a significant inhibiting effect on the presence of FDI for a country pair, but have little impact on the level of FDI flows. A 10% reduction in tax complexity is comparable to a one percentage point reduction in effective corporate tax rates.
Effects of Corporate Tax Reforms on SMEs’ Investment Decisions under the Particular Consideration of Inflation