Public Choice

, Volume 130, Issue 3–4, pp 363–380 | Cite as

Does capital mobility reduce the corporate-labor tax ratio?

original article

Abstract

Previous empirical studies have shown that there is only a small negative (if any) effect of capital mobility on the corporate tax burden. Using data for up to 20 OECD countries in the period 1979–2000 this paper tries to investigate a less rigid hypothesis: Although capital taxes have not substantially declined in the last twenty years the relative burden of corporate to labor taxes may have fallen due to capital mobility. The results suggest that capital mobility has a weak negative impact on the corporate-labor tax ratio. Other factors however, i.e. the size of the country or the share of investment expenditures are more important in explaining the relative tax burden than capital mobility.

Keywords

Capital mobility Corporate taxation Relative tax burden 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Alesina, A., & Drazen, A. (1991). Why are stabilizations delayed? American Economic Review, 81, 1170–1188Google Scholar
  2. Apolte, T. (2001). How tame will leviathan become in institutional competition — competition among governments in the provision of public goods. Public Choice, 107, 359–381CrossRefGoogle Scholar
  3. Ashworth, J., & Heyndels, B. (2001). Political fragmentation and the evolution of national tax structures in the OECD. International Tax & Public Finance, 8, 377–393CrossRefGoogle Scholar
  4. Baldwin, R., & Krugman, P. (2004). Agglomeration, integration and tax harmonization. European Economic Review, 48, 639–658CrossRefGoogle Scholar
  5. Bank Account for Companies Harmonized (2005): http://www.europa.eu.int/comm/economy.finance/ indicators/database.htm. Accessed, 20.4.2005.
  6. Beck, T., Clarke, G., Groff, A., Keefer, P., & Walsh, P. (2001). New tools in comparative political economy: The database of political institutions. World Bank Economic Review, 15, 165–176CrossRefGoogle Scholar
  7. Besley, T., & Case, A. (1995). Incumbent behaviour: Vote seeking, tax setting and yardstick competition. American Economic Review, 85, 25–45Google Scholar
  8. Bretschger, L., & Hettich, F. (2002). Globalization, capital mobility and tax competition: Theory and evidence for OECD countries. European Journal of Political Economy, 18,(4), 695–716CrossRefGoogle Scholar
  9. Bucovetsky, S. (1991). Asymmetric tax competition. Journal of Urban Economics, 30, 167–181CrossRefGoogle Scholar
  10. Bucovetsky, S., & Wilson, J.D. (1991). Tax competition with two tax instruments. Regional Science and Urban Economics, 21, 333–350CrossRefGoogle Scholar
  11. Chakrabarti, A. (2001). The determinants of foreign direct investment: Sensitivity analyses of cross-country regressions. Kyklos, 54, 89–114CrossRefGoogle Scholar
  12. Carey, D., & Rabesona, J. (2002). Average Effective Tax Rates on Capital, Labour and Consumption, CESifo Workshop on Measuring the Tax Burden on Capital and Labor, Munich.Google Scholar
  13. Cusack, T., & Fuchs, S. (2002). Parties, Governments and Legislatures Data Set. WissenschaftszentrumBerlinGoogle Scholar
  14. Daveri, F., & Tabellini, G. (2000). Unemployment, growth and taxation in industrial countries. Economic Policy, 30, 49–104Google Scholar
  15. De Haan, J., Sturm, J.-E., & Volkerink, B. (2004). How to measure the tax burden on labor at the macro level? In: P.B. Sörensen (Ed.), Measuring the tax burden on capital and labour,. CESifo Seminar Series, MIT Press CambridgeGoogle Scholar
  16. Devereux, M.P., Griffith, R., & Klemm, A. (2002). Corporate income tax reforms and international tax competition. Economic Policy, 35, 449–488CrossRefGoogle Scholar
  17. Devereux, M.P., & Griffith, R. (2003). Evaluating tax policy for location decisions. International Tax and Public Finance, 10, 107–126CrossRefGoogle Scholar
  18. Devereux, M.P., Lockwood, B., & Redoano, M. (2002). Do Countries Compete over Corporate Tax Rates? Discussion Paper, University Warwick.Google Scholar
  19. Dreher, A. (2006). The influence of globalization on taxes and social policy: An empirical analysis for OECD countries. European Journal of Political Economy, forthcomingGoogle Scholar
  20. Edwards, J., & Keen, M. (1996). Tax competition and leviathan. European Economic Review, 40, 113–134.CrossRefGoogle Scholar
  21. Ernst & Young ( 2003). Worldwide Corporate Tax Guide.Google Scholar
  22. Garett, G. (1995). Capital mobility, trade and the domestic politics of economic policy. International Organization, 45, 657–687CrossRefGoogle Scholar
  23. Garett, G., & Mitchell, D. (2001). Globalization, government spending and taxation in the OECD. European Journal of Political Research, 39, 145–177Google Scholar
  24. Grubert, H., & Mutti, J. (1991). Taxes, tariffs and transfer pricing in multinational corporate decision making. Review of Economics and Statistics, 73, 285–293CrossRefGoogle Scholar
  25. Haaparanta, P. (1996). Competition for foreign direct investments. Journal of Public Economics, 63, 141–153CrossRefGoogle Scholar
  26. Hays, J.C. (2003). Globalization and capital taxation in consensus and majoritarian democracies. World Politics, 56, 79–113CrossRefGoogle Scholar
  27. Hibbs, D.A. (1977). Political parties and macroeconomic policy. American Political Science Review, 71, 1467–1487CrossRefGoogle Scholar
  28. Hines, J.R., & Rice, E.M. (1994). Fiscal paradise: Foreign tax havens and American Business. Quarterly Journal of Economics, 109, 149–182CrossRefGoogle Scholar
  29. Keen, M., & Marchand, M. (1997). Fiscal competition and the pattern of public spending. Journal of Public Economics, 63, 33–53CrossRefGoogle Scholar
  30. King, M.A., & Fullerton, D. (1984). The taxation of income from capital: A comparative study of the United States, the United Kingdom, Sweden and West Germany. Chicago: University of Chicago PressGoogle Scholar
  31. Kittel, B., & Winner, H. (2005). How reliable is pooled analysis in political economy? The globalization-welfare state nexus revisited. European Journal of Political Research, 44, 269–293CrossRefGoogle Scholar
  32. Krogstrup, S. (2004). Are Corporate Tax Burdens Racing to the Bottom in the European Union? EPRU Working Paper 2004–04, University of Copenhagen.Google Scholar
  33. Ludema, R.D., & Wooton, I. (2000). Economic geography and the fiscal effects of regional integration. Journal of International Economics, 52, 331–357CrossRefGoogle Scholar
  34. Mendoza, E.G., Razin A., & Tesar, L.L. (1994). Effective tax rates in macroeconomics: Cross-country estimates of tax rates on factor incomes and consumption. Journal of Monetary Economics, 34, 297–323CrossRefGoogle Scholar
  35. Nickell, S.J., & Layard, R. (1999). Labor market institutions and economic performance. In: O. Ashfelter, & D. Card (Eds.), Handbook of Labor Economics (Vol. 3C). Amsterdam: North Holland.Google Scholar
  36. Nicodeme, G. (2001). Computing Effective Corporate Tax Rates: Comparisons and Results. Directorate General for Economic and Financial Affairs: Working Paper 153.Google Scholar
  37. OECD (1991). Taxing Profits in a Global Economy: Domestic and International Issues. Paris.Google Scholar
  38. OECD (2005). National Accounts Vol. II. Paris.Google Scholar
  39. OECD (2004). Revenue Statistics. Paris.Google Scholar
  40. Primarolo-Bericht (2000). Bericht der Gruppe Verhaltenskodex (Unternehmens-besteuerung) an den Rat Wirtschaft und Finanzen.Google Scholar
  41. Rodrik, D. (1997). Trade, Social Insurance, and the Limits to Globalization. NBER Working Paper, 5905.Google Scholar
  42. Ruding Report (1992). Report of the Comitee of Independent Experts on Company Taxation, Brusels and Luxembourg.Google Scholar
  43. Quinn, D. (1997). The correlates of change in international financial regulation. Americal Political Science Review, 91,(3), 531–551CrossRefGoogle Scholar
  44. Schwarz, P. (2005). Do Countries Engage in Tax Competition? An Empirical Analysis for the OECD Countries Using Various Indicators of the Tax Burden. Working Paper, University of Göttingen.Google Scholar
  45. Sörensen, P.B. (Ed.) (2004). Measuring the Tax Burden on Capital and Labour,. CESifo Seminar Series, Cambridge: MIT Press.Google Scholar
  46. Swank, D. (2002). Global capital, political institutions, and policy change in developed welfare states. Cambridge: Cambridge University PressGoogle Scholar
  47. Swank, D., & Steinmo, S. (2002). The new political economy of taxation in advanced capitalist democracies. American Journal of Political Science, 46, 642–655Google Scholar
  48. Volkerink, B. (2001). Deficits and taxes: Essays on the political economy of fiscal policy. Capelle: Labyrint PublicationGoogle Scholar
  49. Volkerink, B., & de Haan, J. (2001a). Fragmented government effects on fiscal policy: New evidence. Public Choice, 109, 221–242CrossRefGoogle Scholar
  50. Volkerink, B., & de Haan, J. (2001b). Tax ratios: A critical survey. OECD Tax Policy Studies 5,.Google Scholar
  51. Wilson, J.D. (1991). Tax competition with interregional differences in factor endowments. Regional Sciene and Urban Economics, 21, 423–451CrossRefGoogle Scholar
  52. Wilson, J.D. (1999). Theories of tax competition. National Tax Journal, 52, 269–304Google Scholar
  53. Winner, H. (2005). Has tax competition emerged in OECD countries? Evidence from panel data. International Tax & Public Finance, 12, 667–687CrossRefGoogle Scholar
  54. Zodrow, G., & Mieszkowski, P. (1986). Pigou, tiebout, property taxation, and the underprovision of local public goods. Journal of Urban Economics, 19, 356–370CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2006

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of GöttingenGöttingenGermany

Personalised recommendations