Along with various initiatives to intensify ASEAN integration and ASEAN Free Trade Area, the long term trend of intra-ASEAN FDI inflows during the past two decades has shown a positive projection. Amidst this scenario, member countries compete in offering tax and tax-related incentives to attract investing multinational corporations. Despite the statutory tax rates announced by jurisdictions, the realised corporate tax expenses are revealed by their effective tax rates. Theoretical exercise addresses the nonoptimality of the current competitive tax policy packages offered by most developing countries. The model considers governments' tax policy designs and investment decisions of multinationals in terms of transfer pricing decision within a free trade area. The equilibrium tax rates in competing and co-operative regimes are illustrated. The application empirically investigates Thailand's effective corporate tax rates calculated from publicly available financial information of 240 companies listed in the Stock Exchange of Thailand during 2005- 2008 and their contribution to the country's corporate fiscal revenue. Panel regression across industries suggests that, considering potential tax treaties within ASEAN Free Trade Area, the overall current competitive effective tax rates can still be raised to increase the joint fiscal revenue. Interestingly, the effective tax rates calculated have gradually increased over the last few years. © EuroJournals Publishing, Inc. 2010.