Original scientific paper
https://doi.org/10.1080/1331677X.2023.2285782
Corporate income taxation and external balances in the European Union
Marina Tkalec
orcid.org/0000-0001-7974-9345
*
Goran Vukšić
* Corresponding author.
Abstract
This study examines the impact of corporate taxation on the
external balances of 27 European Union member countries from
the late 1990s to 2021. Using an ARDL process and a 2-stage least
squares estimation procedure, we find that, in the short term,
higher corporate taxation is positively and significantly related to
the current account balance and the trade balance for the whole
sample. There are considerable differences in the effects in the
euro area and non-euro countries, with the latter experiencing a
much stronger short-term impact. In the long term, there are no
critical differences in the results between the two groups, and the
impact of corporate taxation is positive but statistically significant
only for the trade balance. The size of the impact of corporate
taxation on net exports and current account balances is of similar
magnitude, which likely implies that the international profit shifting
via manipulating intrafirm prices in international trade does
not strongly affect the external balances in our sample. Our
results imply that initiatives to increase global tax rates could be
justified from an international trade perspective
Keywords
Taxation; corporate income tax; trade balance; current account balance; european union; the euro area
Hrčak ID:
321737
URI
Publication date:
11.5.2024.
Visits: 76 *