Firm mobility and jurisdictions' tax rate choices: Evidence from immobile firm entry

• 成果类型: Article
• 署名作者: Langenmayr, Dominika; Simmler, Martin
• 署名单位: Leibniz Association; Ifo Institut; University of Oxford; Leibniz Association; DIW Berlin - Deutsches Institut fur Wirtschaftsforschung
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2021.104530
• 发表日期: 2021
• 关键词: Corporate taxation; Firm mobility; Tax competition

摘要

Capital mobility is one of the key determinants of corporate tax rates. We first show theoretically thatgovernments will set higher tax rates on firm profits after an immobile firm has entered. We then testthis prediction in a well-identified setting, using the rapid growth of wind power plants (a very immobileindustry) and the large variation in local business taxes across Germany for identification. We confirmthat municipalities increase corporate tax rates by up to 24% after immobile firm entry. The effect isstronger when immobile firms make up a larger share of the overall tax base. (c) 2021 Elsevier B.V. All rights reserved.