This paper analyses the development of taxes on corporate income in EU and G7 countries over the last two decades. We establish a number of stylized facts about their development. Taxcutting and basebroadening reforms have had the effect that, on average across EU and G7 countries, effective tax rates on marginal investment have remained fairly stable, but those on more profitable investments have fallen. We discuss two possible explanations of these stylized facts arising from alternative forms of tax competition. First, governments may be responding to a fall in the cost of income shifting, which puts downward pressure on the statutory tax rate. Second, reforms are consistent with competition for more profitable projects, in particular those earned by multinational firms.
Authors
Research Associate University of Oxford and Oxford Centre for Business Taxation
Michael joined the IFS in 1982 and he has been a Research Fellow since 1990 and a Professor of Economics at the University of Oxford.
CPP Co-Director, IFS Research Director
Rachel is Research Director and Professor at the University of Manchester. She was made a Dame for services to economic policy and education in 2021.
Alexander Klemm
Journal article details
- DOI
- 10.1111/1468-0327.00094
- Publisher
- Oxford University Press
- Issue
- October 2002
Suggested citation
M, Devereux and R, Griffith and A, Klemm. (2002). 'Corporate income tax reforms and international tax competition' (2002)
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