Tax competition among Eastern and Western European countries: With whom do countries compete?

In this paper, we investigate the existence of strategic interactions between the former EU15 countries and the countries of Central and Eastern Europe regarding corporate taxes. We estimate an empirical model of strategic interactions among 27 European countries for the period 1995-2005, using GMM. Our results confirm the existence of tax interdependence within Western Europe but show that strategic interactions among Eastern European countries are less common. Finally, we show that there are some interactions related to taxes between these two regions of Europe.