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How do Corporate Taxes affect International Trade?

Author

Listed:
  • Mario Holzner

    (The Vienna Institute for International Economic Studies, wiiw)

  • Branimir Jovanović

    (The Vienna Institute for International Economic Studies, wiiw)

  • Goran Vukšić

Abstract

This paper investigates how corporate income taxes affect international trade, and identifies the underlying channel. Using data on 33 NACE sectors, for 34 EU and OECD economies, over the period 2005-2014, we find that corporate income taxes reduce exports and imports only when the stock of foreign direct investment (FDI) is high. The effect is present primarily in the service sector and in countries with low corporate taxes. We interpret these findings as evidence that multinational enterprises reduce their operations in countries that raise their corporate taxes. The effect has been found to be small on aggregate, implying that the expected increase in corporate taxes in the future, arising from the global minimum tax, is unlikely to hurt international trade.

Suggested Citation

  • Mario Holzner & Branimir Jovanović & Goran Vukšić, 2021. "How do Corporate Taxes affect International Trade?," wiiw Working Papers 212, The Vienna Institute for International Economic Studies, wiiw.
    • Handle: RePEc:wii:wpaper:212
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    File URL: https://wiiw.ac.at/how-do-corporate-taxes-affect-international-trade-dlp-5990.pdf
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    Cited by:

    1. Joalane Rosina Tota & Denis Nfor Yuni, 2023. "Tax and International Trade in the SADC Region:A Panel Gravity Model Approach," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(4), pages 24-44.

    More about this item

    Keywords

    taxation; profits; international trade; exports; imports; FDI;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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