Taxes and Competitiveness

Taxes and Competitiveness

Around the world, the tax laws are shaped by concerns with competitiveness. This paper provides a general theory of how taxes impact competitiveness. As part of that theory, this paper also introduces the concept of tax-based competitiveness neutrality. A tax system is competitively neutral when taxes do not cause competitors to change their relative valuations of any investments. This paper th...

Business Taxes and International Competitiveness

Around the world, policymakers are obsessed with the competitiveness of their domestic companies and domestically based multinational corporations (MNCs). Such concerns frequently influence policy, especially tax policy. In this paper, I develop a theory of how taxes affect the international competitiveness of businesses. I then use that theory to evaluate basic tax policy decisions, such as th...

The Impact of Taxes on Trade Competitiveness

Few macroeconomic studies exist on the effects of taxes on international trade. Our hypothesis is that higher tax rates raise a country’s production costs, leading to a decrease in exports in the long run. With panel data for 25 OECD countries, we use average effective tax rates on consumption, labor income and capital income to examine their impact on bilateral trade. We find that that all thr...

Consumption Taxes and International Competitiveness in a Keynesian World

The present paper analyzes the consequences of a consumption tax reform for the export sector. In particular, it offers an explanation why exporters support such a reform although economic theory basically predicts trade neutrality. To this purpose, the basic neoclassical model is replaced with two Keynesian assumptions, i.e. sticky wages and absence of perfect foresight. It is derived that in ...

International Competitiveness, Tax Incentives, and a New Argument for Tax Sparing: Preventing Double Taxation by Crediting Implicit Taxes