erosion of tax collection. The large differences in statutory tax rates might also reflect a stronger choice
towards lower rates and larger bases in the new Member States. However, there are limits to base
widening as it cannot offset forever continuing rate cuts. Another problem is that very low corporate
income tax rates threaten the so-called "backstop function" of that tax, which is to protect personal
income tax revenue from the risk of individuals subject to personal income tax acquire the legal form of
corporations to reduce their tax bill; if this happens the erosion of tax revenues would be more apparent
in the revenue from the personal income tax rather than from the corporate income tax^17.
(^17) See de Mooij and Nicodème (2006) for a discussion.