A partial race to the bottom: corporate tax developments in emerging and developing economies

This paper assembles a new dataset on corporate income tax regimes in 50 emerging and developing economies over 1996–2007 and analyzes their impact on corporate tax revenues and domestic and foreign investment. It computes effective tax rates to take account of special regimes, such as tax holidays,...

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Bibliographic Details
Published inInternational tax and public finance Vol. 20; no. 4; pp. 596 - 617
Main Authors Abbas, S. M. Ali, Klemm, Alexander
Format Journal Article
LanguageEnglish
Published Boston Springer US 01.08.2013
Springer Nature B.V
Subjects
Business Taxation/Tax Law
Competition
Corporate income tax
Corporate taxation
Corporate taxes
Developing countries
Economic development
Economic rent
Economics
Economics and Finance
Emerging markets
Foreign investment
Globalization
Holidays & special occasions
International taxation
Investment
LDCs
Present value
Public Finance
Special economic zones
Studies
Tax incentives
Tax planning
Tax rates
Tax revenues
E62
Low-income countries
Corporate income tax
Emerging markets
Special economic zones
H25
Effective tax rates
Investment
Developing economies
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Summary:This paper assembles a new dataset on corporate income tax regimes in 50 emerging and developing economies over 1996–2007 and analyzes their impact on corporate tax revenues and domestic and foreign investment. It computes effective tax rates to take account of special regimes, such as tax holidays, temporarily reduced rates and increased investment allowances. There is evidence of a partial race to the bottom: countries have been under pressure to lower tax rates in order to lure and boost investment. In the case of standard tax systems (i.e. tax rules applying under normal circumstances), the effective tax rate reductions have not been larger than those witnessed in advanced economies, and revenues have held up well over the sample period. However, a race to the bottom is evident among special regimes, most notably in the case of Africa, creating effectively a parallel tax system where rates have fallen to almost zero. Regression analysis reveals higher tax rates adversely affect domestic investment and FDI, but do raise revenues in the short run.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0927-5940
1573-6970
DOI:10.1007/s10797-013-9286-8