Tax Policies in a Transition to a Knowledge-Based Economy: The Effective Tax Burden of Companies and Highly Skilled Labour

Abstract

Globalization and the fast-approaching digitalization increase capital and labour mobility which fosters tax competition among countries worldwide. Based on a unique dataset, the authors have analysed the development of effective tax burdens on corporations and highly skilled labour for 26 countries of the Organisation for Economic Co-operation and Development (OECD) over the last decade. The synthesis of both indicators allows to identify tax strategies of the considered countries and further elaborate on the scope of future tax competition in the context of current developments. Overall, the authors ascertain a declining trend in effective tax burdens on corporate investments whereas increases in the top statutory tax rates for high-income earners and a rather constant average effective tax burden on labour for a disposable income of EUR 100,000 are observed. Current developments such as the agreement on a global minimum tax or the transition to a knowledge-based economy can establish a new lower bound to tax competition on corporate investments and might shift its focus. Effective tax rates, tax competition, location attractiveness, corporate location decision, devereux/Griffith methodology, human resource tax analyser.