Template-type: ReDIF-Paper 1.0
Author-Name: Yongzheng Liu
Author-Email:  yongzheng.liu@ruc.edu.cn
Author-Workplace-Name: Renmin University of China

Title: Do Government Preferences Matter for Tax Competition?

Abstract: This paper explores how government preferences a
ect the choices of capital tax rates
in the presence of tax competition. We develop a model in which governments, di
erentiating
in their preferences for economic development and regional equality, compete
for mobile capital over corporation taxes. The key prediction of the model, borne out
in data from OECD countries over the years 1990-2007, is that countries emphasizing
more on economic development tend to choose lower level of corporate income tax rates
than the counterparts that stressing more on regional equality. Our result contributes
to the tax competition literature by advancing a new element, heterogeneous government
preferences, as another potential source of asymmetric tax policy responses that
is widely observed across countries.

Keywords: Tax competition; heterogeneous government preferences; asymmetric tax
rates

Length: 26 pages

Creation-Date: 2014-06-28

File-URL: http://icepp.gsu.edu/files/2015/03/ispwp1428.pdf

File-Format:application/pdf

Handle: RePEc:ays:ispwps:paper1428