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Accelerating Downhill: How the EU Shapes Corporate Tax Competition in the Single Market

Authors


Achim Kemmerling
Central European University Budapest
Nador Utca 9
1051 Budapest, Hungary
Tel +36-327 3000 (2079)
email Kemmerlinga@ceu.hu

Abstract

Tax competition in the European Union is shaped by four partly opposed institutional mechanisms. While market integration and enlargement increase competitive pressure, the tax co-ordination of the Council of Ministers and the tax jurisprudence of the European Court of Justice could potentially reduce it. The net effect is to accelerate tax competition. This article presents quantitative evidence to suggest that tax competition is stronger in the EU than in the rest of the world, and explores qualitatively why tax co-ordination and tax jurisprudence have failed to prevent a race to the bottom in tax rates.

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