Karen Crabbé

Are Your Firm's Taxes Set in Warsaw? Spatial Tax Competition in Europe

Tax competition within the EU is fiercer than in the rest of the OECD with tax rates falling rapidly. This paper analyzes tax responses of EU-15 countries to corporate tax changes in the EU-10 new member states as a function of their proximity to these new member states. The average corporate tax rate in the new member states has always been considerably lower than the average in the EU-15 countries. Their entry into the EU eliminated capital barriers, allowing firms to locate in one of the new EU-10 with full access to the European Market. Our results indicate that EU-15 countries geographically closer to the new member states respond stronger to corporate tax changes in these new member states. We use a theoretical and a spatial regression framework to test the hypothesis that distance to a low tax region intensifies countries’ tax reaction functions.

Trade, Institutions and Export Specialization

This paper studies whether trade integration between the EU15 and Central Europe has led to more export specialization in Central Europe. Moreover, we analyze the impact of institutional reforms in Central Europe on export specialization. The empirical analysis is set up for thirteen Central European countries over the period 1989-2000. Our results indicate that a reduction in tariffs between EU15 and Central Europe led to increased export specialization in Central Europe. In addition to trade integration, we show that institutional reforms and in particular enterprise reforms contributed to export specialization.

Corporate Tax Savings when Hiring a Big 4 Auditor: Empirical Evidence for Belgium

In this paper we show that hiring a Big 4 auditor results in substantial corporate income tax savings, compared to hiring a non-Big 4 auditor. Our results are obtained from an empirical model that controls for other factors that may affect companies income tax burdens. We use a population of larger Belgian firms between 1993 and 2002. The findings suggest that Big 4 audited firms provide (explicitly or implicitly) additional tax expertise which is transferred to their clients and lowers their effective tax rates compared to non-Big 4 audited firms.

The Impact of the Auditor and Tax Advice on the Effective Tax Rate

Thisxa0paperxa0studies the effect of tax advicexa0expenses andxa0the auditor on the effective tax rate for large Belgian firms. Moreover, we analyze how this relation changes when the corporate governance code was implemented in 2003. Following the Sarbanes Oxley Act of 2002, Belgium approved a similar but less strict code. This study uses Belgian firm‐level data between 1999 andxa02007. The results indicate that spending money on tax advicexa0does not reduce the ETR, while hiring a big4 auditor does. Although it seems that hiring a big4 auditor in the years after the corporate governance code went into practice leads to a smaller reduction in ETR than before. On average, a big4 auditor can lower the ETR of a Belgian firm by 1 percentage point. Thisxa0indicatesxa0that information transfer between the auditor andxa0the tax departmentxa0is lessxa0commonxa0afterxa0the implementation of the corporate governance code.