Author ORCID Identifier
Semester
Summer
Date of Graduation
2024
Document Type
Dissertation
Degree Type
PhD
College
Chambers College of Business and Economics
Department
Accounting
Committee Chair
John Treu
Committee Co-Chair
Kip Holderness
Committee Member
Kip Holderness
Committee Member
Lauren Cooper
Committee Member
Jason MacDonald
Abstract
This dissertation primarily examines tax competition at the national level, with a particular focus on the tax reaction functions of countries within the Organization for Economic Cooperation and Development (OECD). There are three different studies in the dissertation. The first study uses the Tax Cuts and Jobs Act of 2017 (TCJA) as a setting to empirically examine whether members of the OECD reduced their own statutory corporate tax rates in response to the US statutory corporate tax cut ushered in by the TCJA in a process of tax competition. The second study is a non-empirical examination of tax competition and the global minimum tax that has been agreed to as a potential solution to tax competition. The third study empirically examines whether corporate tax avoidance behavior changes after the adoption of a compensation clawback policy.
Study one examines national tax reactions to statutory corporate tax rate reductions in other countries. The last few decades have seen many countries reduce their statutory corporate tax rates for a variety of reasons. Usually, a primary reason is to attract foreign investment and also to prevent profits from shifting to lower tax jurisdictions in a process of tax competition that has been termed a ‘race to the bottom.’ Study one uses the TCJA as a setting to examine whether OECD members responded to the U.S. corporate tax cut ushered in by the TCJA by reducing their own corporate tax rates in a process of tax competition. The study provides evidence indicating, but not concluding, that the TCJA induced tax competition among OECD members. The study contributes to the tax competition literature in suggesting that tax competition continues to be a problem for countries and that the global minimum tax, if implemented successfully, would provide a floor to tax competition and stem the tide of corporate tax rate declines.
The second study examines the Inclusive Framework on Base Erosion and Profit Shifting which sets a goal of having multinational enterprises pay a minimum tax rate of at least 15% on their global income. Many countries including many of the major trading partners of the United States have adopted or announced plans to adopt the Inclusive Framework, which has faced substantial opposition in the U.S. Congress. The study traces the history of tax competition leading to the need for a global minimum tax and concludes with a recommendation that the United States take steps to implement it.
The third study empirically examines the relationship between the adoption of a compensation clawback and corporate tax avoidance behavior.
The dissertation makes two important contributions. First, it highlights that a major factor in the persistence of tax competition is corporate tax rate differentials that enable the profit shifting that results in tax competition. Secondly, the dissertation contributes to the understanding of the effect of the adoption of compensation clawback policies on the tax avoidance practices of firms and helps shareholders assess the mix of incentives and deterrents utilized in executive compensation contracts.
Recommended Citation
Awuah, Yaw O., "Corporate Tax Competition: An Examination of National Tax Reaction Functions to Corporate Tax Rate Reductions in Other Countries" (2024). Graduate Theses, Dissertations, and Problem Reports. 12554.
https://researchrepository.wvu.edu/etd/12554