Partisan Politics in Corporate Tax Competition

• Autores: Steffen Osterloh, Marc Debus
• Localización: XVII Encuentro de Economía Pública: políticas públicas ante la crisis, 2010, pág. 62
• Idioma: inglés
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• Resumen

  • This paper studies the effects of political factors on corporate taxes in the past 30 years � a period of intensifying competitive pressure in Europe. We introduce a sophisticated measure of government ideology derived from content analyses of party manifestos into the literature dealing with partisan effects on fiscal policy. This measure offers several advantages compared to the indicators traditionally used in public finance. In this manner, we can confirm our main hypothesis derived from a simple tax competition model, namely that left-wing governments tend to generate higher corporate tax burdens. However, we also find evidence that this effect declines in the course of time. Moreover, we are able to reveal that this partisan effect is mainly driven by the governments� stance on welfare policies. Finally, we show that a higher degree of government fragmentation, as well as the leadership of a head of state with an educational background in law counteracts the general tendency to lower tax rates.