Chapter

Adjusting National Tax Policy to Economic Internationalization Strategies and Outcomes

Steffen Ganghof

in Welfare and Work in the Open Economy Volume II: Diverse Responses to Common Challenges in Twelve Countries

Published in print September 2000 | ISBN: 9780199240920
Published online November 2003 | e-ISBN: 9780191600180 | DOI: http://dx.doi.org/10.1093/0199240922.003.0013
 Adjusting National Tax Policy to Economic Internationalization Strategies and Outcomes

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While tax competition is widely regarded as a major fiscal constraint on the welfare state, in fact, very little is known about its real impact. How have advanced industrialized states reacted to the growing mobility of parts of their tax base? To what extent has tax competition resulted in a shift of burdens to less mobile tax bases? In answering these questions, the article identifies the different shape and force of tax competition in different areas of taxation, and the differing ways in which countries have responded. The conclusion is that the pressures of international tax competition are real, but so are countervailing economic and political pressures that work against a general ‘race to the bottom’ in the taxation of potentially mobile bases. At the same time, revenue‐preserving adjustment strategies have prevented large‐scale revenue losses at the price of creating politically more controversial structures of taxation.

Keywords: fiscal constraints; mobility; politics; race to the bottom; revenue loss; tax base; tax competition; tax structure; taxation; welfare state

Chapter.  19643 words.  Illustrated.

Subjects: Comparative Politics

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