James Hines, University of Michigan - Evaluating Tax Harmonization

Room 605
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  • Melbourne Institute Seminar

Title: Evaluating Tax Harmonization

Abstract:  A second order Taylor approximation implies that tax harmonization advances government objectives only if tax competition reduces average tax rates by more than the standard deviation of observed rates.  In 2020 the mean world corporate tax rate was 25.9%, and the standard deviation 4.5%, so if there is an efficient harmonized tax rate, it must exceed 30.4%.  An efficient minimum tax rate equals the average tax rate among those constrained by the minimum plus the average effect of tax competition.  Hence there are dominated regions: in the 2020 data, there is no effect of tax competition for which a world minimum corporate tax rate between 4% and 27% would efficiently advance collective objectives.

Presenter: James Hines, University of Michigan

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