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N° 246 |
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| June 2004 |
| Are Corporate Tax
Rates Heading for 0%? |
Agnès Bénassy-Quéré
Amina Lahrèche-Révil |
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| The last enlargement of the European Union
brought countries with low corporate tax rates into the EU, and has revived worries
that tax competition could constrain economic policies in Member States. Yet,
the Union's most geographically central and richest countries, in which firms
wish to invest, can still maintain higher rates provided that a solution is found
to tax optimisation practices, whereby firms locate activities in one country
and pay taxes in another. Furthermore, firms also take into consideration available
infrastructure and public services when locating their activities. Nevertheless,
corporate pressure for tax competition risks distorting tax and spending structures,
at the expense of households. There are thus political and social reasons favouring
tax coordination in Europe, though this does not mean uniformity. |
Abstract |
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