The empirical study of the tax competition in the European Union

Abstract

The increase in the capital mobility forces the Member States to decrease tax burden on capital. Lower revenues from capital taxation have to be compensated by the increase in tax burden on labor. The aim of the article is verify the hypothesis that increasing capital mobility leads to the decrease in the tax burden on capital and also that decrease in the tax burden on capital leads to the increase in the tax burden on labor. The hypothesis will be tested for EU Member States in the time period 1991–2005 by using cointegration analysis.

Keywords

• tax competition
• capital mobility
• tax burden
• cointegration analysis
• correlation