Acknowledgements

This paper analyses the development of taxes on corporate income in EU and G7 countries over the last two decades. We establish a number of stylised facts about their development. Tax-cutting and base-broadening reforms have had the effect that effective tax rates on marginal investment have remained fairly stable, but those on more profitable investments have fallen. We discuss two possible explanations. First, governments may be responding to a fall in the cost of income shifting, which puts downward pressure on the statutory tax rate. Second, reforms are consistent with competition for more profitable projects, in particular those earned by multinational firms