Policy Responses to Tax Competition

Policy Responses to Tax Competition provides an in-depth exploration of how jurisdictions design taxes on mobile economic factors. Tax competition between jurisdictions that seek to attract businesses and residents presents both opportunities and challenges. It can foster government efficiency and provide a counterweight to lobbying for increased spending, but it can also result in inefficiently low tax rates and revenue shortfalls as jurisdictions vie for tax bases. This volume examines the economic drivers and consequences of tax competition and presents empirical evidence on its effects.
The volume has three parts. The first reviews existing research on the determinants and consequences of tax competition and related policy initiatives such as development incentives. The second focuses on specific policies, such as the Kansas-Missouri noncompete pact and international measures like the OECD’s Base Erosion and Profit Shifting initiative, that are designed to limit tax competition. It also considers the economic responses to these policies, the distributional impact of competition-reducing policies, and potential strategic reactions of other governments. The final section presents case studies of the effects of various policies, including intermunicipal cooperation in France and corporate tax equalization in Switzerland. The results in this volume provide new insights on the nature of interjurisdictional tax competition and the range of potential responses available to jurisdictions at various levels in federal systems.