Are Your Firm's Taxes Set In Warsaw' Spatial Tax Competition In Europe
Source: Universite Catholique de Louvain
Tax competition within the EU is fiercer than in the rest of the OECD with tax rates falling rapidly. This paper analyzes tax responses of EU-15 countries to corporate tax changes in the EU-10 new member states as a function of their proximity to these new member states. The average corporate tax rate in the new member states has always been considerably lower than the average in the EU-15 countries. Their entry into the EU eliminated capital barriers, allowing firms to locate in one of the new EU-10 with full access to the European Market. The results indicate that EU-15 countries geographically closer to the new member states respond stronger to corporate tax changes in these new member states.