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Closer Economic Integration and Corporate Tax Systems Kimberly A. Clausing June 2007

Closer Economic Integration and Corporate Tax Systems Kimberly A. Clausing June 2007. Determinants of Corporate Tax Rates Determinants of Corporate Tax Revenues Role of International Integration 36 Countries (OECD/EU) over 1979-2002. OECD Corporate Tax Rates, 1979-2002.

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Closer Economic Integration and Corporate Tax Systems Kimberly A. Clausing June 2007

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  1. Closer Economic Integration and Corporate Tax SystemsKimberly A. ClausingJune 2007 Determinants of Corporate Tax Rates Determinants of Corporate Tax Revenues Role of International Integration 36 Countries (OECD/EU) over 1979-2002

  2. OECD Corporate Tax Rates, 1979-2002

  3. EU Integration Measures, 1979-2002

  4. Tax Rate Specification Corporate Tax Rateit =  + 1 Individual Tax Rateit +2 Government Consumption/GDPit +3 FDI-out/GDPit +4 ln(GDP)it + 5 ln(GDP per-capita)it +6 Leftit +7 EUit +8 EU completeit +9 EU applyit +it

  5. Determinants of Corporate Statutory Tax Rates, 1979-2002

  6. Central Government Corporate Tax Revenues Relative to GDP, OECD Countries

  7. Determinants of Revenues

  8. Estimation Corporate Tax Revenue/ GDPit =  + 1 Tax Rateit +2 Tax Rateit2 + 3 Corporate Profitabilityit + 4 Size of the Corporate Sectorit And Later: • Proxies for corporate data • x Type of Corporate Tax Systemit • t Time Dummies or Time Trend

  9. Determinants of Revenue/GDP, 1979-2002

  10. Determinants of Revenue/GDP, 1979-2002

  11. Revenue Curves, EU and Others

  12. Findings and Implications • Tax rates depend on factors that affect the elasticity of tax base: EU integration, FDI, country size • Other factors as expected: individual rate, government size and type • Parabolic relationship between tax rates and revenues • Types of Responsiveness • EU Members and More International Countries => More Responsive Tax Base • Territorial Systems v. Credit Systems

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