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Tax competition effects of a minimum tax rate: Empirical evidence from German municipalities

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  • Buettner, Thiess
  • Poehnlein, Maximilian

Abstract

This paper explores the effects of a federal law that obligates previously unregulated municipalities in Germany to set a minimum tax rate on firms’ taxable profits. In particular, we examine the tax-policy response of municipalities that compete locally with “tax-haven municipalities”, i.e.municipalities that originally have set lower and, in some cases, even zero tax rates. The analysis distinguishes treated and not-treated municipalities based on their distance to a tax-haven. Our results show that the majority of municipalities do not change their tax policy. Apart from the tax-havens, only high-tax municipalities show a response – they reduce the business tax rate without experiencing a decline in tax revenues.

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  • Buettner, Thiess & Poehnlein, Maximilian, 2024. "Tax competition effects of a minimum tax rate: Empirical evidence from German municipalities," Journal of Public Economics, Elsevier, vol. 236(C).
    • Handle: RePEc:eee:pubeco:v:236:y:2024:i:c:s0047272724000847
    DOI: 10.1016/j.jpubeco.2024.105148
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    Cited by:

    1. Chen, Xuyang, 2024. "The Global Minimum Tax, Investment Incentives and Asymmetric Tax Competition," MPRA Paper 121893, University Library of Munich, Germany.
    2. Xuyang Chen, 2024. "The Global Minimum Tax, Investment Incentives and Asymmetric Tax Competition," Papers 2409.05397, arXiv.org.
    3. Andreas Hauer & Hayato Kato, 2024. "A Global Minimum Tax for Large Firms Only: Implications for Tax Competition," Discussion Papers in Economics and Business 24-06, Osaka University, Graduate School of Economics.

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    More about this item

    Keywords

    Tax competition; Minimum tax; Local business tax; Tax havens;
    All these keywords.

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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