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Is Tax Competition Harmful?

  • Robert W. McGee

Abstract

One of the benefits of globalization is that it is bringing economies closer together. As trade and investment barriers fall, investors are able to take advantage of an ever increasing number of investment opportunities. That sounds like good news, doesn’t it? The problem with this scenario, if you are one of the bloated, high-tax Western European welfare states, is that you are witnessing an exodus of investment capital to jurisdictions that are more tax friendly. Corporations that are headquartered in one of these high tax countries are increasingly exercising their options to invest elsewhere. The result is a loss of jobs and tax revenue to the high tax jurisdictions and an influx of capital, jobs and economic growth to the countries that offer lower corporate tax rates.

Keywords

Welfare State Investment Barrier Private Business People 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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NOTES

  1. 1.
    United Nations, World Investment Report 2001, New York: United Nations Conference on Trade and Development (UNCTAD), 2001, p. 291, as cited in Chris Edwards and Veronique de Rugy, Internationa! Tax Competition: A 21st-century Restraint on Government, Policy Analysis No. 431, Washington, DC: Cato Institute, April 12,2002, at p. 3. [www.cato.org].Google Scholar
  2. 2.
    Edwards and de Rugy, p. 3.Google Scholar
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    OECD, Harmful Tax Competition: An Emerging Global Issue, Paris: OECD, 1998. www.oecd.org.Google Scholar
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    OECD, Towards Global Tax Co-operation: Report to the 2000 Ministerial Council Meeting and Recommendations by the Committee on Fiscal Affairs; Progress on identifying and Eliminating Harmful Tax Practices, Paris: OECD, 2000, p. 5. www.oecd.org.Google Scholar
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    Daniel J. Mitchell, A Tax Competition Primer: Why Tax Harmonization and Information Exchange Undermine America’s Competitive Advantage in the Global Economy, Backgrounder No. 1460, Washington, DC: Heritage Foundation, July 20, 2001 [www.heritage.org].Google Scholar
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    Bruce Zagaris, Application of the OECD Harmful Tax Practices Criteria to the OECD Countries Shows Potential Dangers to the U.S. Sovereignty, April 25, 2001, posted at www.freedomandprosperity.org
  7. 7.
    Daniel J. Mitchell, An OECD Proposal to Eliminate Tax Competition Would Mean Higher Taxes and Less Privacy, Backgrounder No. 1395, Washington, DC: Heritage Foundation, September 18, 2000 [www.heritage.org].Google Scholar
  8. 8.
    Cordia Scott, OECD ‘Harmful’ Tax Competition May Violate WTO Obligations, Expert Says, Tax Notes International, April 24, 2001, reproduced atwww.freedomandprosperity.org
  9. 9.
    David Ricardo, Principles of Political Economy and Taxation, 1817.Google Scholar

Copyright information

© Springer Science+Business Media New York 2004

Authors and Affiliations

  • Robert W. McGee
    • 1
  1. 1.Andreas School of BusinessBarry UniversityMiami ShoresUSA

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