Abstract Is corporate tax competition a threat to democracy in the EU? The answer dependscrucially on a positive analysis of the effects of tax competition on national policy autonomy.Most analyses focus on direct effects on corporate tax rates and revenues. Wecontend that this focus is too narrow. It overlooks the fact that corporate tax competitionalso has important indirect effects on the progressivity and revenue-raising potentialof personal income taxation. We elaborate on these indirect effects theoreticallyand empirically, and explore the implications for the normative debate on the EU'sdemocratic defi cit. Our fi ndings show that European integration can constrain nationalredistribution in a major way: the democratic defi cit is real. Greater political contestationover the EU's policy agenda is desirable in order to mitigate this defi cit.
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