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I. INTRODUCTION Corporate tax rates in most countries declined considerably over the last two decades. Between 1995 and 2016, the average rate in OECD countries fell by more than a [...], While corporate tax rates in OECD countries declined over the last decades, revenues from corporate taxation relative to gross domestic product (GDP) remained remarkably stable. This paper uses a comprehensive firm-level data set to analyze this rate-revenue puzzle in corporate taxation. Focusing on the period 1995-2016, we show that the reduction in corporate tax rates was counterbalanced by a pronounced increase in corporate profits. We decompose the rise in profits into changes in earnings before interest and depreciation, depreciation, and financial profits. On average, these factors contributed almost equally to the tax-base expansion, albeit differently across sectors, countries, and firm sizes. Keywords: corporate income taxation, corporate tax revenues, corporate profitability JEL Code: H25

We analyze the economic impact of using carbon pricing revenue to fund the European Union (EU) budget. Such a reform would redistribute from countries with above‐average carbon‐intensive production to less‐carbon‐intensive countries. Once the reform is implemented, the low‐carbon countries will prefer a lower carbon price (i.e., laxer climate policy at the EU level) than before the reform, and vice versa. As a result, EU climate policy becomes less ambitious and less disputed, where quantitative impacts presumably remain small. Weaker incentives for national governments to enforce emission taxes after revenue centralization might also contribute to higher emissions. [ABSTRACT FROM AUTHOR]

I. INTRODUCTION The decision of the United Kingdom to leave the European Union (EU) has given rise to a lively debate about the implications of this move for corporate tax [...], This paper develops a model of tax competition with three countries that initially form a union where countries refrain from using different tax rates in different sectors of the economy. We study the impact of one country leaving the union. We show that the introduction of discriminatory taxation in one country increases tax policy heterogeneity within the remaining union. Moreover, the incentives for the two remaining countries to harmonize their tax rates decline. We discuss these results in the context of the debate on the tax policy implications of Brexit. Keywords: tax competition, preferential tax regimes, Brexit JEL Codes: H20, H73 How will Brexit affect international corporate tax competition? The view is widespread that the United Kingdom might become a large tax haven and that the remaining European Union (EU) member states will finally take steps toward more tax harmonization. But there is nothing that stops the United Kingdom from cutting taxes to tax haven levels, even as an EU member state. And if the other 27 EU states wanted to harmonize their corporate taxes they could do so even under present circumstances, for instance using the instrument of enhanced cooperation, which allows a subset of EU member states to act jointly in different policy areas, including taxation. Another consequence of Brexit is more important for corporate taxation: After leaving the EU, the United Kingdom will no longer be subject to EU state aid regulations and the EU code of conduct for business taxation. These regulations do allow national governments to cut headline tax rates, but they prevent them from offering distinct tax rates to different companies or sectors. To investigate the implications of a policy shift towards tax discrimination in a country leaving the EU we set up a simple three-country model with competition for internationally mobile capital. We start by analyzing a situation where the three countries form a "union" that shares the norm of uniform taxation. We compare the outcome of tax competition and the incentives for two of the three countries to harmonize their taxes to a situation where the third country leaves the union and introduces discriminatory taxation. The analysis leads to three key results. First, the introduction of tax discrimination in one country leads to increasing tax policy heterogeneity. Second, if the two countries remaining in the union harmonize their tax rates, the introduction of tax discrimination in the third country redistributes tax revenue between the countries remaining in the union. The country with lower taxes before harmonization loses while the high tax country benefits. Third, the incentives for tax harmonization decline as the third country introduces discriminatory taxation. This also holds if transfers across countries to share gains from harmonization are possible. These results are important for several reasons. First, the fact that a country leaves the union does not generally intensify tax competition. It puts the low tax countries remaining in the union under stronger competitive pressure and eases pressures on high tax countries in our model. Second, the result that the exit of one country makes harmonization less attractive does not rely on the argument that tax coordination becomes less effective if the number of participating countries falls and leakage effects grow. This questions the widespread view that Brexit will make tax coordination or harmonization among the remaining EU countries more likely. This paper is related to several strands of literature. Most notably it establishes a link between the literature on preferential tax regimes and that on partial tax harmonization by studying the implications of tax discrimination in a three-country model, where only a subset of countries can discriminate or harmonizes their tax rates.

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