TY - JOUR

T1 - RACE TO THE BOTTOM IN INTERNATIONAL TAX COMPETITION

T2 - SOME CONCEPTUAL ISSUES

AU - Sokolovska, Olena

PY - 2016

Y1 - 2016

N2 - The purpose of the article is to provide analysis of conceptual background of the international tax competition, and its negative externality - the race to the bottom situation. We distinguished the three types of tax competition models, notably, traditional, asymmetric and Leviathan models. Also we analyzed briefly the main benefits and disadvantages of international tax competition in the modern world. Using both comparative and graphical analysis we provide a brief evaluation of the dynamics of statutory corporate income tax rates in countries worldwide. For the purpose of such analysis we distinguished the four regions: Europe, Latin America, Africa and countries of the former USSR. We used panel data on statutory corporate income tax rates for 70 countries for the period of 2006-2015. We found that in the three regions, notably Europe, Latin America and countries of the former USSR there were no significant changes in statutory corporate income tax rates while in African countries they have changed substantially. This can be explained by the weakness of these tax systems, i.e. the countries compete with each other, primarily by reducing statutory tax rates. But in order to make some conclusions both about taxation of corporate income and possibility of the race-to-bottom situation occurrence in neighboring countries, the real tax rates, taking into account the tax incentives and eliminations should be considered in future research. The obtained results could be useful for the elaboration of guidelines in order to create an attractive investment climate both for domestic and non-resident investors.

AB - The purpose of the article is to provide analysis of conceptual background of the international tax competition, and its negative externality - the race to the bottom situation. We distinguished the three types of tax competition models, notably, traditional, asymmetric and Leviathan models. Also we analyzed briefly the main benefits and disadvantages of international tax competition in the modern world. Using both comparative and graphical analysis we provide a brief evaluation of the dynamics of statutory corporate income tax rates in countries worldwide. For the purpose of such analysis we distinguished the four regions: Europe, Latin America, Africa and countries of the former USSR. We used panel data on statutory corporate income tax rates for 70 countries for the period of 2006-2015. We found that in the three regions, notably Europe, Latin America and countries of the former USSR there were no significant changes in statutory corporate income tax rates while in African countries they have changed substantially. This can be explained by the weakness of these tax systems, i.e. the countries compete with each other, primarily by reducing statutory tax rates. But in order to make some conclusions both about taxation of corporate income and possibility of the race-to-bottom situation occurrence in neighboring countries, the real tax rates, taking into account the tax incentives and eliminations should be considered in future research. The obtained results could be useful for the elaboration of guidelines in order to create an attractive investment climate both for domestic and non-resident investors.

KW - International taxation

KW - tax competition

KW - investment

KW - corporate income tax

KW - race to the bottom

KW - cross-country analysis

U2 - 10.15826/jtr.2016.2.2.018

DO - 10.15826/jtr.2016.2.2.018

M3 - статья

VL - 2

SP - 98

EP - 110

JO - Journal of Tax Reform

JF - Journal of Tax Reform

SN - 2412-8872

IS - 2

ER -