Browsing by Subject "tax policy"

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  • Eskelinen, Teppo; Ylonen, Matti (2017)
    Tax havens and tax flight have lately received increasing attention, while interest toward multilateral trade policies has somewhat diminished. We argue that more attention needs to be paid exactly to the interrelations between trade and tax policies. Drawing from two case studies on Panama's trade disputes, we show how World Trade Organization (WTO) rules can be used both to resist attempts to sanction secrecy structures and to promote measures against tax flight. The theory of new constitutionalism can help to explain how trade treaties can 'lock in' tax policies. However, our case studies show that trade policy not only 'locks in' democratic policy-making, but also enables tax havens to use their commercialized sovereignty to resists anti-secrecy measures. What is being 'locked in' are the policy tools, not necessarily the policies. The changing relationship between trade and tax policies can also create new and unexpected tools for tackling tax evasion, underlining the importance of epistemic arbitrage in the context of new constitutionalism. In principle, political actors with sufficient technical and juridical knowledge can shape global tax governance to various directions regardless of their formal position in the world political hierarchies. This should be taken into account when trade treaties are being negotiated or revised.
  • Sirviö, Tom-Henrik (Helsingin yliopisto, 2021)
    During the recent decades corporate income tax rates have declined. This development may be due to several issues, such as changes in the political environment or increased knowledge of behavioral effects of corporate taxation. One prominent explanation is tax competition. Tax competition is defined as noncooperative tax regime setting by independent governments such that the tax policy decisions affect the allocation of mobile tax base(s) among different countries. Tax regimes include the statutory tax rates as well as the tax bases and other parts of corporate tax systems. Tax competition is an important phenomenon for multiple reasons. Lower tax rates may imply issues in financing the public sector. On the other hand, it makes some of the issues of the international corporate tax system visible. This thesis reviews theories of tax competition. The aim is to provide an analysis of the different aspects of tax competition and review how different institutional structures are modelled in tax competition framework. Studying the main implications of tax competition is an important part of the thesis. The first formal models of tax competition consider a world economy which consists of many identical countries. Firms maximize profits and governments maximize utility of the representative agent. It is shown that tax competition drives tax rates to an inefficiently low level. Later tax competition research develops both the institutional set -up of tax competition and modelling frameworks applied to study it. The results of this thesis imply that the result of the first tax competition models is strong. Tax competition drives corporate tax rates to an inefficiently low level even if the key assumptions are relaxed. On the other hand, some important extensions imply that corporate income tax rates are in an optimal level even in presence of tax competition. However, in most cases tax competition is harmful since it drives corporate income tax rates to inefficiently low levels. On the other hand, tax competition literature also provides other results. Considering sequential tax competition instead of simultaneous shows that tax rates may in equilibrium be higher if one country acts as a leader. This may be one explanation why tax rates have not declined to zero as the famous race to the bottom hypothesis suggests. Tax competition literature also provides analysis on the effect of tax havens. These results are, however, more confusing. Tax competition can decrease welfare or be welfare improving. This thesis reviews important aspects of tax competition literature and focuses on the institutional set-up of theories of tax competition. There remain some gaps in the literature. Some institutional set-ups are not analysed in the tax competition context. On the other hand, literature focusing on the empirics of tax competition is scarce. One of the important aspects of tax competition is how to limit it. This issue has a great amount of current attention in the work of OECD, for example.