Edited by Emilio Albi and Jorge Martinez-Vazquez
Chapter 4: The Challenges of Corporate Income Taxes in a Globalized World
Emilio Albi* 1 INTRODUCTION This chapter reviews corporate income taxation in the context of the economic globalization experienced in the last 30 years. Given present flows of capital and income between nations and the importance of multinational firms, due consideration can no longer be given to corporate taxation without contemplating international issues. The main purpose of this chapter is to examine the current corporate tax trends derived from the changes that occurred in the last three decades with a view to defining potential policy prescriptions aimed at making corporate taxation less distortionary and costly. To make this issue more manageable, our analysis will focus on European Union (EU) countries, chiefly on EU(15) corporate taxation, paying special attention to Spain whenever appropriate. Other European or non-European OECD countries may be considered as terms of reference. The chapter will take an economist’s approach and I will attempt to provide a comprehensive summary of what we know about the economic issues of corporate income taxes (CITs) and their alternatives. The agents involved in tax systems, however, are far more diverse than economists, and have their own objectives, which will also be considered here. In particular, policy-makers and tax officials give priority to revenue, administration and enforcement issues, while the business community may pay more attention to the effects of statutory and average effective tax rates or compliance costs, and less to the distortions associated with marginal tax rates, a main interest of economists. Within the EU, common tax policy and the rulings...
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