The economic consequences of corporate tax rates reductions in the EU: evidence using a computable general equilibrium model

In a globalised world where capital is highly mobile governments are eager to attract foreign investors by lowering corporate tax rates. Recent trends points toward a revival of a race to the bottom in corporate income tax (CIT) rates in developed economies. EU countries have been particularly activ...

ver descrição completa

Detalhes bibliográficos
Autores: Alvarez Martínez, María Teresa, Barrios, Salvador, d'Andria, Diego, Gesualdo, María, Pontikakis, Dimitrios, Pycroft, Jonathan
Tipo de documento: artigo
Data de publicação:2019
País:España
Recursos:Universidad Pablo de Olavide (UPO)
Repositório:RIO. Repositorio Institucional Olavide
Idioma:inglês
OAI Identifier:oai:rio.upo.es:10433/26156
Acesso em linha:https://hdl.handle.net/10433/26156
Access Level:Acceso aberto
Palavra-chave:Computable general equilibrium model
Corporate taxation
European Union
id ES_45c3df2c187c7ecef6e97efb1baef948
oai_identifier_str oai:rio.upo.es:10433/26156
network_acronym_str ES
network_name_str España
repository_id_str
spelling The economic consequences of corporate tax rates reductions in the EU: evidence using a computable general equilibrium modelAlvarez Martínez, María TeresaBarrios, Salvadord'Andria, DiegoGesualdo, MaríaPontikakis, DimitriosPycroft, JonathanComputable general equilibrium modelCorporate taxationEuropean UnionIn a globalised world where capital is highly mobile governments are eager to attract foreign investors by lowering corporate tax rates. Recent trends points toward a revival of a race to the bottom in corporate income tax (CIT) rates in developed economies. EU countries have been particularly active in this respect given that capital can move freely between member states and that multinationals are in a good position to exploit the multiplicity of tax regimes in the EU to reduce their tax burden. Yet a generalised fall in CIT rate could prove detrimental to tax revenues and trigger increase of other taxes in order to meet fiscal policy objectives. However, a general fall in CIT rates could also spur investment and growth and prove to be a good fiscal policy strategy if, as a result, the corporate tax base increases. The final economic and fiscal impact of a reduction in corporate tax rates is therefore unclear. In this paper we use a CGE model to quantify the macroeconomic consequences of unilateral CIT rates reduction in the EU accounting for each country's characteristics in terms of economic size and tax system and interactions arising between and within countries. We pay special attention to the role played by cross-country spillovers and fiscal strategies aimed at ensuring budget neutrality which represent an important policy constraint at EU level. Uncoordinated tax reforms significantly impact national economies and third-country effects can be significant when large countries implement a CIT rate cut. Small countries are also better-off unilaterally reducing their CIT rate at the expense of other EU countries. We also find that negative spillovers tend to be mitigated when the country reducing its CIT rate restores its budget balance by cutting either public expenditures or social transfers. A larger degree of non-EU capital mobility also tends to reduce the negative spillover effects of unilateral CIT rate reductions.Wiley20262026-02-1920192019-01-0120192019-01-01journal articlehttp://purl.org/coar/resource_type/c_6501AMhttp://purl.org/coar/version/c_ab4af688f83e57aainfo:eu-repo/semantics/articleapplication/pdfhttps://hdl.handle.net/10433/26156reponame:RIO. Repositorio Institucional Olavideinstname:Universidad Pablo de Olavide (UPO)Inglésengopen accesshttp://purl.org/coar/access_right/c_abf2Attribution-NonCommercial-NoDerivatives 4.0 Internationalhttps://creativecommons.org/licenses/by-nc-nd/4.0/info:eu-repo/semantics/openAccessoai:rio.upo.es:10433/261562026-06-13T12:46:27Z
dc.title.none.fl_str_mv The economic consequences of corporate tax rates reductions in the EU: evidence using a computable general equilibrium model
title The economic consequences of corporate tax rates reductions in the EU: evidence using a computable general equilibrium model
spellingShingle The economic consequences of corporate tax rates reductions in the EU: evidence using a computable general equilibrium model
Alvarez Martínez, María Teresa
Computable general equilibrium model
Corporate taxation
European Union
title_short The economic consequences of corporate tax rates reductions in the EU: evidence using a computable general equilibrium model
title_full The economic consequences of corporate tax rates reductions in the EU: evidence using a computable general equilibrium model
title_fullStr The economic consequences of corporate tax rates reductions in the EU: evidence using a computable general equilibrium model
title_full_unstemmed The economic consequences of corporate tax rates reductions in the EU: evidence using a computable general equilibrium model
title_sort The economic consequences of corporate tax rates reductions in the EU: evidence using a computable general equilibrium model
dc.creator.none.fl_str_mv Alvarez Martínez, María Teresa
Barrios, Salvador
d'Andria, Diego
Gesualdo, María
Pontikakis, Dimitrios
Pycroft, Jonathan
author Alvarez Martínez, María Teresa
author_facet Alvarez Martínez, María Teresa
Barrios, Salvador
d'Andria, Diego
Gesualdo, María
Pontikakis, Dimitrios
Pycroft, Jonathan
author_role author
author2 Barrios, Salvador
d'Andria, Diego
Gesualdo, María
Pontikakis, Dimitrios
Pycroft, Jonathan
author2_role author
author
author
author
author
dc.contributor.none.fl_str_mv
dc.subject.none.fl_str_mv Computable general equilibrium model
Corporate taxation
European Union
topic Computable general equilibrium model
Corporate taxation
European Union
description In a globalised world where capital is highly mobile governments are eager to attract foreign investors by lowering corporate tax rates. Recent trends points toward a revival of a race to the bottom in corporate income tax (CIT) rates in developed economies. EU countries have been particularly active in this respect given that capital can move freely between member states and that multinationals are in a good position to exploit the multiplicity of tax regimes in the EU to reduce their tax burden. Yet a generalised fall in CIT rate could prove detrimental to tax revenues and trigger increase of other taxes in order to meet fiscal policy objectives. However, a general fall in CIT rates could also spur investment and growth and prove to be a good fiscal policy strategy if, as a result, the corporate tax base increases. The final economic and fiscal impact of a reduction in corporate tax rates is therefore unclear. In this paper we use a CGE model to quantify the macroeconomic consequences of unilateral CIT rates reduction in the EU accounting for each country's characteristics in terms of economic size and tax system and interactions arising between and within countries. We pay special attention to the role played by cross-country spillovers and fiscal strategies aimed at ensuring budget neutrality which represent an important policy constraint at EU level. Uncoordinated tax reforms significantly impact national economies and third-country effects can be significant when large countries implement a CIT rate cut. Small countries are also better-off unilaterally reducing their CIT rate at the expense of other EU countries. We also find that negative spillovers tend to be mitigated when the country reducing its CIT rate restores its budget balance by cutting either public expenditures or social transfers. A larger degree of non-EU capital mobility also tends to reduce the negative spillover effects of unilateral CIT rate reductions.
publishDate 2019
dc.date.none.fl_str_mv 2019
2019-01-01
2019
2019-01-01
2026
2026-02-19
dc.type.none.fl_str_mv journal article
http://purl.org/coar/resource_type/c_6501
AM
http://purl.org/coar/version/c_ab4af688f83e57aa
dc.type.openaire.fl_str_mv info:eu-repo/semantics/article
format article
dc.identifier.none.fl_str_mv https://hdl.handle.net/10433/26156
url https://hdl.handle.net/10433/26156
dc.language.none.fl_str_mv Inglés
eng
language_invalid_str_mv Inglés
language eng
dc.rights.none.fl_str_mv open access
http://purl.org/coar/access_right/c_abf2
Attribution-NonCommercial-NoDerivatives 4.0 International
https://creativecommons.org/licenses/by-nc-nd/4.0/
dc.rights.openaire.fl_str_mv info:eu-repo/semantics/openAccess
rights_invalid_str_mv open access
http://purl.org/coar/access_right/c_abf2
Attribution-NonCommercial-NoDerivatives 4.0 International
https://creativecommons.org/licenses/by-nc-nd/4.0/
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv Wiley
publisher.none.fl_str_mv Wiley
dc.source.none.fl_str_mv reponame:RIO. Repositorio Institucional Olavide
instname:Universidad Pablo de Olavide (UPO)
instname_str Universidad Pablo de Olavide (UPO)
reponame_str RIO. Repositorio Institucional Olavide
collection RIO. Repositorio Institucional Olavide
repository.name.fl_str_mv
repository.mail.fl_str_mv
_version_ 1869407183228108800
score 15,811543

Registros relacionados