From Tax Cartel To Tax Reform: Corporate Tax Reform In The Era Of Globalization

Abstract

The effects of corporate taxation are a strongly contested issue amongst economists, politicians, and the international community. Countries within the Organization for Economic Cooperation and Development have gradually decreased corporate tax rates post World War II to compete for foreign direct investment. Collecting sufficient tax revenue, while creating a competitive environment for business are valence issues that every country faces. The World Economic Forum published the Global Competitiveness Index in 2016, assessing the social and political factors that comprise a country's global competitiveness score. This paper uses the Global Competitiveness Index to assess empirically the economic factors that lead to an overall increase or decrease in the global competitiveness for an individual country. The empirical evidence discussed concludes that the statutory tax rate and tax code complexity are the most relevant economic factors in assessing a countries global competitiveness. The theoretical evidence further demonstrates that a territorial tax system is more likely to increase global competitiveness over a worldwide corporate tax structure.