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The Political Economy of ‘Tax Spillover’: A New Multilateral Framework

Baker, A. & Murphy, R. ORCID: 0000-0003-4103-9369 (2019). The Political Economy of ‘Tax Spillover’: A New Multilateral Framework. Global Policy, 10(2), pp. 178-192. doi: 10.1111/1758-5899.12655


Tax spillovers are the effects one country’s tax rules and practices have on other countries. They have been assessed in aggregate terms by the IMF using econometric models, and were found to have a ‘significant and sizable’ impact in reducing corporate tax bases and rates in ‘developing countries. However, a widely accepted form of country level spillover analysis remains elusive, despite demands from NGOs and International Organisations. We present the first framework for conducting comprehensive national level spillover analyses using a qualitative evaluation framework in three steps. First we identify the importance of the normative underpinnings of multilateral evaluation frameworks. We make the case for an international moral harm convention that discourages states from doing harm to other states through their tax policies. Second we illustrate some of the difficulties in conducting country level spillover analyses using econometric methods, while advancing a broader conception of spillover, based on the defensive purpose of corporation tax. Third we present a new framework for conducting spillover analysis, that assesses relationships between four direct taxes and a number of administrative and institutional features of tax systems. Finally, we present initial pilot qualitative assessments for the UK and Denmark, involving scores, risk dashboards and visualisations.

Publication Type: Article
Publisher Keywords: tax spillover, tax competition, qualitative multilateral evaluation, IMF, OECD, World Bank, race to the bottom
Subjects: H Social Sciences > HJ Public Finance
J Political Science
J Political Science > JF Political institutions (General)
J Political Science > JZ International relations
Departments: School of Policy & Global Affairs > International Politics
Text - Published Version
Available under License Creative Commons: Attribution International Public License 4.0.

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