Tax Competition in the European Union

Added on - 28 May 2020

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AbstractThe study illustrates in detail about tax competition in the European Union and its probableinfluence on corporate location. Policy makers are mainly concerned as regards a raceparticularly to the bottom in rates of tax on corporate income. In essence, EU has instituted aspecific code of conduct for fighting ’harmful tax competition’. Furthermore, the OECD hascarries out what it considers to be tax havens for reducing profit shifting, and for slowing taxcompetition. The member states of EU are instituting the rates of tax alongside the bases oftax owing to the tax competition. In essence, the member states are forced to lessen theoverall corporate tax load as the nations with the lower rates of tax and narrower tax bases aremore likely to attract greater number of payers of tax to their jurisdiction. Issues of taxcompetition in the EU affect the tax strategies and there exists no substantiation ofspontaneous coordination of tax created by competition across EU nations. This studytherefore observes a higher rate of corporate tax in countries generally refers to a higher rateof tax in the nation itself. This in turn affects the cost of production of business concerns andthereby affects the location decisions of firms.
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