Document Type

Review

Publication Date

2006

Abstract

There is, among some of your reviewer's friends, an abhorrence of tax competition, and a fascination with tax harmonization, that defies simple understanding. The way that the case is typically presented, European tax harmonization is desirable because eliminating tax differences between European nations would promote economic efficiency. With greater economic efficiency, there is more of everything to go around, so it becomes possible to maintain life exactly as it currently is, except that now, instead of every family having one toaster, they can have two. A wise goal, a worthy goal, this economic efficiency-though the drive to eke more out of existing resources in order to give every household that second toaster hardly seems the stuff of vicious and prolonged political controversy. Since the potential output benefits of European tax harmonization, if they are positive at all, are likely to be very small, perhaps this is not, ultimately, an argument about the kind of efficiency you can get when a firm slightly contracts its German operation in order to expand slightly its Italian operation. Quite possibly this is, in fact, an argument about the future of European society-about whether, and how, to sustain government expenditures at the levels to which they grew in the late twentieth century. Economic efficiency is just intellectual cover for what the fight really concerns, which is the cost and desirability of the modern welfare state.

Comments

2006 B.T.R. No.2, © Thomson Reuters (Professional) UK Limited and contributors, available via: www.westlaw.com


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