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Tax Competition – Areas of Display and Effects

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  • Narcis Eduard Mitu

Abstract

In the past, governments had more freedom in setting their taxes as the barriers to free movement of capital and people were high. The gradual process of globalization is lowering these barriers and results in rising capital flows and greater manpower mobility. Tax competition exists when governments are encouraged to lower fiscal burdens to either encourage the inflow of productive resources or discourage the exodus of those resources. With tax competition in the era of globalization politicians have to keep tax rates “reasonable” to dissuade workers and investors from moving to a lower tax environment. Most countries started to reform their tax policies to improve their competitiveness. However, the tax burden is just one part of a complex formula describing national competitiveness. The other criteria like total manpower cost, labor market flexibility, education levels, political stability, legal system stability and efficiency are also important.

Suggested Citation

  • Narcis Eduard Mitu, 2009. "Tax Competition – Areas of Display and Effects," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 67-76.
    • Handle: RePEc:ers:journl:v:xii:y:2009:i:2:p:67-76
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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