The political economy of corporate tax harmonization - Why do European politicians (dis)like minimum tax rates?

Setting minimum tax rates is a well discussed way of mitigating pressure from tax competition. This paper investigates which motives shape the support for a minimum corporate tax among politicians. We make use of a unique data base: a survey among members of the European parliament. Our results confirm that the politicians' ideology as well as individual characteristics such as educational background exert a major influence. Moreover, several predictions regarding national interests are derived from various standard tax competition models. These hypotheses are partly supported by the data; in particular, different national preferences towards social equality shape the support. A comparison with survey results from the German Bundestag reveals that German politicians on the national level do not show different attitudes towards tax rate harmonization.

► We study the motives which shape politicians' support for a minimum corporate tax. ► We use data from surveys conducted at the European Parliament and German Bundestag. ► Politicians' ideology and individual characteristics exert a major influence. ► National interests - such as a strategy of raising rivals' costs - also matter. ► German politicians on the national and European level show similar attitudes.