摘要:本文是一篇分析欧盟经济一体化的留学生经济essay,欧盟可以比喻为一个联邦,因为其成员国家的经济是一个单一的市场,没有对货物,人员,资本和服务(单一市场,1993年)的限制流动的经济一体化。
lected because they have relatively lower ranking against the 'core' countries to attract the foreign direct investments.
To sum up into on sentence the research question of this paper can be formulated like this: Does the level of corporate taxation of the EU periphery countries have altered due to the enlargement of 2004 in order to compete the new member states in attracting foreign direct investments? In what degree the effect of lowering corporate taxes is effective in attracting FDI when other factors are also considered?
History review
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Theoretical Background
Discussing Sinn‘s model on competition of Countries
Globalization has meant that a great many countries are now facing tax competition. According to Sinn (2003:27) “the corporate tax rates of all the G7 countries except Italy have fallen in the last 20 years, most of them by more than 10 percentage points. Considering the previous remark we can say that a country is trying to become an attractive place for investments”. However location decisions made by multinational firms are not only dependent on tax rates, as Sinn states (2003: 27): “legal system, protection of property, social harmony, and public infrastructure are playing a significant role on the directions of FDI”.
In the upcoming paragraphs we will consider Sinn’s Model in order to study the relationship between taxes, public infrastructure goods and the location decision made by firms. Firstly we will analyze a model without public goods, secondly a model with public infrastructure, and finally a more complicated model that involves congestion externalities.
The argument that was first developed by MacDougall (1960) and Richman (1963) and is stated by Sinn (2003) states that in a small open economy a tax on mobile capital is not efficient due to the fact that the capital will be able to shift the tax burden in the immobile capital. Describing the following figure it would be easy to follow the line of reasoning behind this argument.
FIGURE 1:
The erosion of source taxes in tax competition
Source: Sinn, H.W. (2003) The New Systems Competition
First of all the country is producing a homogeneous output under the following homogeneous production function: f(L,K) where L de
notes labor and K is capital which is internationally mobile and the amount of it is changeable, and r is the net world market return.
Without any taxation foreign firms invest in the country up to the point where fK=r, and choose K1 amount of capital. If the country decides to impose a tax on capital t equal to BE the amount of capital which is invested by foreign firms will decrease to K2. Sinn (2003:29) states that “as the return r is given in the world market, capital leaves the country until its net marginal product after is again equal to the given world market level” in other words:
fK – t = r
Because the wage income has decreased from AEG to ABC we conclude that any effort to impose a tax upon mobile capital (domestic or foreign) will have a negative impact to the owners of the immobile factor. So, in the previous simplified model K1 stands for the amount of capital which causes equilibrium in tax competition between countries.
As we stated previously it is not only a country’s tax burden that is impo
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