The tax competition for mobile capital, in particular the reluctance of small countries to agree on measures of tax coordination, has ongoing political and economic fallouts within Europe. We analyse the effects of introducing a two tier structure of capital taxation, where the asymmetric member...

Heterogeneous firm productivity raises the question of whether governments should pursue `pick-the-winner' strategies by subsidizing highly productive firms more, or taxing them less, than their less productive counterparts. We study this issue in a setting where governments can set...

The ownership nationality of large US multinational companies plays an implicit but important role in the current debate over how such companies should be taxed. This paper identifies that role and investigates what is actually known about where these companies’ shareholders reside.

We propose a methodology for assessing the neutrality of corporate tax reform proposals in an open economy. The methodology identifies variation in effective tax rates to assess the proximity of a tax system to capital export neutrality (CEN) and to market neutrality (MN, which holds if all...

This paper contributes to the literature providing indirect evidence for profit shifting within multinational companies. In contrast to the previous studies we account for the tax responsiveness of the capital stock and analyse the impact of corporate taxes on both pre- and post-tax...

We study the optimal combination of corporate tax rate and tax base in a model of a small open economy with heterogeneous firms. We show that it is optimal for the small country's government to effectively subsidize capital inputs by granting a tax allowance in excess of the true costs of...

A recent empirical literature has arisen documenting the response of one nation?s policy choices, including tax, environmental, and labour policies, to that of others. This has been largely interpreted as evidence of competition, be it for mobile resources (like FDI, taxable book income etc.) or...

We present a new model of tax-induced transfer pricing as an alternative to the oft-used concealment model. Inspired by interviews with practitioners, we consider a large multinational ?firm which is audited by the tax authority in the high-tax location. When this country adjusts the transfer...

This paper assesses the efficiency properties of recent corporation tax reform proposals of the European Union to introduce international loss consolidation and formula apportionment. We extend the effective tax rate methodology of Devereux and Griffith (1999) to allow for a potential loss and...

The European Commission proposes to replace the current system of taxing corporate income of separate accounting by a two-step 'consolidate and apportionment' procedure. This paper uses a large set of unconsolidated firm-level data to assess the likely impact on corporate tax revenues in each...