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Do Asia and Pacific countries compete in corporate tax rates?

Do Asia and Pacific countries compete in corporate tax rates?
Do Asia and Pacific countries compete in corporate tax rates?

Do governments in the emerging Asia and Pacific region independently set corporate tax rates? This paper answers the question and contributes to the growing empirical tax competition literature by (1) generating a predictable tax reaction function considering the 'lumpy' nature of economic geography; (2) using GMM to estimate the tax reaction functions using panel data of 14 countries in the Asia and Pacific region between 1980 and 2007. We find evidence of strategic fiscal policy interaction. Globalization has positive effects on the interactive policy setting. Country size has also positive effect but the effects are offset when the openness deepens. Furthermore, a substitution relation between capital and labor is implied. Overtime, countries in the Asia and Pacific region seem to become more competitive in corporate tax rates.

agglomeration economy, Asia and Pacific region, GMM estimation, panel data, tax competition
1354-7860
25-51
Huang, W.H.
f63ee160-ca9e-44b3-af46-a56236d9e6e2
Regis, P.J.
d696452e-72ef-48bc-9409-80996e297ca7
Huang, W.H.
f63ee160-ca9e-44b3-af46-a56236d9e6e2
Regis, P.J.
d696452e-72ef-48bc-9409-80996e297ca7

Huang, W.H. and Regis, P.J. (2014) Do Asia and Pacific countries compete in corporate tax rates? Journal of the Asia Pacific Economy, 19 (1), 25-51. (doi:10.1080/13547860.2012.745239).

Record type: Article

Abstract

Do governments in the emerging Asia and Pacific region independently set corporate tax rates? This paper answers the question and contributes to the growing empirical tax competition literature by (1) generating a predictable tax reaction function considering the 'lumpy' nature of economic geography; (2) using GMM to estimate the tax reaction functions using panel data of 14 countries in the Asia and Pacific region between 1980 and 2007. We find evidence of strategic fiscal policy interaction. Globalization has positive effects on the interactive policy setting. Country size has also positive effect but the effects are offset when the openness deepens. Furthermore, a substitution relation between capital and labor is implied. Overtime, countries in the Asia and Pacific region seem to become more competitive in corporate tax rates.

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More information

e-pub ahead of print date: 24 December 2012
Published date: 1 January 2014
Keywords: agglomeration economy, Asia and Pacific region, GMM estimation, panel data, tax competition

Identifiers

Local EPrints ID: 441133
URI: http://eprints.soton.ac.uk/id/eprint/441133
ISSN: 1354-7860
PURE UUID: 647f5e1a-a811-425e-96f5-e6a0fd3e842b
ORCID for P.J. Regis: ORCID iD orcid.org/0000-0002-3256-464X

Catalogue record

Date deposited: 02 Jun 2020 16:31
Last modified: 09 Jan 2022 04:07

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Contributors

Author: W.H. Huang
Author: P.J. Regis ORCID iD

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