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Tax competition and finance equilibrium

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  • Thiess Büttner

Abstract

In light of the unabated tax competition in the EU, political demands are increasingly voiced that the allocation of structural funds be tied to a minimum taxation. Their strategic nature notwithstanding, these demands can be justified within the framework of the theory of fiscal federalism. They are in accord with the logic of fiscal equalisation. A corresponding European fiscal equalisation would lead to such serious problems, however, that there would be no alternative to a reduction of statutory tax rates in Germany. In any case the structural funds do not lend themselves as means to bring about pressure since, because of their co-financing by the EU member states, they tend to have the effect of raising tax rates.

Suggested Citation

  • Thiess Büttner, 2006. "Tax competition and finance equilibrium," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 59(04), pages 12-28, February.
    • Handle: RePEc:ces:ifosdt:v:59:y:2006:i:04:p:12-28
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    References listed on IDEAS

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    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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