Rate Cutting Tax Reforms and Corporate Tax Competition in Europe

Journal article

Publication Details

Author(s): Heinemann F, Overesch M, Rincke J
Journal: Economics and Politics
Publisher: Blackwell Publishing Inc.
Publication year: 2010
Volume: 22
Journal issue: 3
Pages range: 498-518
ISSN: 0954-1985
eISSN: 1468-0343
Language: English


While there is a large and growing number of studies on the determinants of corporate tax rates, the literature has so far ignored the fact that the behavior of governments in setting tax rates is often best described as a discrete choice decision problem. We set up an empirical model that relates a government's decision whether to cut its corporate tax rate to the country's own inherited tax and taxes in neighboring countries. Using comprehensive data on corporate tax reforms in Europe since 1980, we find evidence suggesting that the position in terms of the tax burden imposed on corporate income relative to geographical neighbors strongly affects the probability of rate-cutting tax reforms. Countries are particularly likely to cut their statutory tax rate if the inherited tax is high and if they are exposed to low-tax neighbors.

FAU Authors / FAU Editors

Rincke, Johannes Prof. Dr.
Lehrstuhl für Volkswirtschaftslehre, insbesondere Wirtschaftspolitik

External institutions with authors

Zentrum für Europäische Wirtschaftsforschung (ZEW)

How to cite

Heinemann, F., Overesch, M., & Rincke, J. (2010). Rate Cutting Tax Reforms and Corporate Tax Competition in Europe. Economics and Politics, 22(3), 498-518. https://dx.doi.org/10.1111/j.1468-0343.2010.00375.x

Heinemann, Friedrich, Michael Overesch, and Johannes Rincke. "Rate Cutting Tax Reforms and Corporate Tax Competition in Europe." Economics and Politics 22.3 (2010): 498-518.


Last updated on 2018-14-07 at 06:23