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Capital Account Liberalization and Corporate Taxes

By: Mr.Ben Lockwood,Michael B. Devereux,Michela Redoano

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Capital Account Liberalization and Corporate Taxes

By: Mr.Ben Lockwood,Michael B. Devereux,Michela Redoano

This paper studies whether exchange controls, particularly on the capital account, affect the choice of corporate tax rates, using a panel of 21 OECD countries over the period 1983-99. It builds on existing literature by (1) using a unique dataset with several different measures of the corporate tax rate calculated from the actual parameters of the tax systems, and (2i) allowing exchange controls to affect the intensity of strategic interaction between countries in setting taxes, as well as the levels of tax they choose. We find some evidence that (1) the level of a country’s tax, other things equal, is lowered by a unilateral liberalization of exchange controls; and (2) that strategic interaction in taxsetting between countries is increased by liberalization. These effects are stronger if the country is a high-tax one and if the tax is the statutory or effective average one. There is also evidence that countries’ own tax rates are reduced by liberalization of exchange controls in other countries.

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Page Count

33

Publisher

International Monetary Fund

Published Date

ISBN 10

1451859139

ISBN 13

9781451859133

Capital Account Liberalization and Corporate Taxes

By: Mr.Ben Lockwood,Michael B. Devereux,Michela Redoano

Write a review Read reviews Take a Quiz Solve Book Puzzle

Capital Account Liberalization and Corporate Taxes

By: Mr.Ben Lockwood,Michael B. Devereux,Michela Redoano

This paper studies whether exchange controls, particularly on the capital account, affect the choice of corporate tax rates, using a panel of 21 OECD countries over the period 1983-99. It builds on existing literature by (1) using a unique dataset with several different measures of the corporate tax rate calculated from the actual parameters of the tax systems, and (2i) allowing exchange controls to affect the intensity of strategic interaction between countries in setting taxes, as well as the levels of tax they choose. We find some evidence that (1) the level of a country’s tax, other things equal, is lowered by a unilateral liberalization of exchange controls; and (2) that strategic interaction in taxsetting between countries is increased by liberalization. These effects are stronger if the country is a high-tax one and if the tax is the statutory or effective average one. There is also evidence that countries’ own tax rates are reduced by liberalization of exchange controls in other countries.

Average ratings

N/A

5

0%

4

0%

3

0%

2

0%

1

0%

Solve jigsaw puzzle

Age

Page Count

33

Publisher

International Monetary Fund

Published Date

ISBN 10

1451859139

ISBN 13

9781451859133