The Impact of Globalization on Corporate Taxation: Evidence from The KOF Globalization Index

Abstract

The increase in globalization has led to the redefinition of the tax policy perceptions of countries. The increase in globalization has also led to pressures on governments to revise their taxation policies in order to compensate for the potential risks that may arise. It is noteworthy that many countries around the world have reduced corporate tax rates in recent years. Thus, this paper investigates the role of increasing globalization in this process of decline. For this, the paper tests whether globalization has a significant effect on corporate taxation by using a panel of 33 countries over the period 1998-2016. The paper takes into account three main dimensions of globalization: economic, trade and politics. Moreover, the paper uses the two different measurements of globalization: de facto and de jure. The empirical results suggest a negative relationship between globalization and corporate tax. The results are robust in terms of different dimensions and measurements of globalization. It can be concluded that global integration does matter for policymakers and increasing integration also influences independent national fiscal and economic policies of countries.

Keywords

• globalization
• corporate tax rate
• panel data
• kof globalization index
• küreselleşme
• kurumlar vergi oranı
• panel veri
• kof küreselleşme endeksi