Working Paper: CEPR ID: DP4721
Authors: Hylke Vandenbussche; Boudewijn Janssen; Karen Crabb
Abstract: This is the first Paper that looks at regional tax competition within one single country. In many countries in Europe, regions within a country differ substantially in their economic development and attractiveness to firms. Belgium is a typical example of a country where the economic situation of its three regions is very different. Our findings are indicative of regional tax competition, with a lower Effective Tax Rate (ETR) in the peripheral region of Wallonia than in Flanders. In addition to location variables, our empirical model explaining firm level heterogeneity in ETRs includes firm characteristics, sector membership and variables capturing statutory tax breaks.
Keywords: Belgian firms; company accounts; effective tax rates
JEL Codes: C50; F36; H25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lower enforcement (K40) | Effective Tax Rates (ETRs) (H29) |
| higher unemployment rates (J64) | lower enforcement (K40) |
| political factors (P16) | Effective Tax Rates (ETRs) (H29) |
| Wallonia (L59) | Effective Tax Rates (ETRs) (H29) |
| Flanders (N94) | Effective Tax Rates (ETRs) (H29) |
| regional differences (R11) | Effective Tax Rates (ETRs) (H29) |