This paper surveys the literature on tax competition, and uses it to analyse current European proposals to harmonise corporate tax rates. It begins, in the course of Section One, by introducing the phenomenon of international tax competition, and illustrates, with the use of secondary research, the reality of the regulatory "race to the bottom". Section Two, however, demonstrates the harmful consequences of tax competition - with reference to the immobile factors of production - and makes obvious the necessity of effective intervention. Section Three then introduces and evaluates the calibre of the current proposals to tackle tax competition through collusion and harmonisation, and concludes negatively in the process. As illustrated in this discussion, any efforts to harmonise corporate taxes above the international equilibrium will not only fail to solve the problem at hand, but will exacerbate them, and may even serve to undermine and destabilise the political Union. Section Four then introduce an alternative solution to the problem - in the form of the residence principle - and Section Five concludes.
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Paper provided by Utrecht School of Economics in its series Working Papers with number
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Find related papers by JEL classification: E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Ivaldi, Marc & Jullien, Bruno & Rey, Patrick & Seabright, Paul & Tirole, Jean, 2003.
"The Economics of Tacit Collusion,"
IDEI Working Papers
186, Institut d'Économie Industrielle (IDEI), Toulouse.
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