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Constructing an Alternative Tax Model against the Background of a Changing (Tax) Sovereignty Paradigm within the EU

  • Luc Nijs

Abstract

In this chapter we will analyze closely what alternative taxation model can be constructed taking into account (1) the typical contemporary problems that occur in current tax systems due to globalization and supranational engagements of sovereigns and (2) the current use of instrumentalism by policymakers with respect to the social, economic, and even geo-political objectives it has prioritized from a policy perspective. That will initially require a further analysis of the essence of tax sovereignty and the functions that taxation has in a 21st century society. That includes the nature of the changing relationship between the sovereign and the taxpayer and its collateral implications in terms of the ‘willingness to pay’ of taxpayers and the level of instrumentalism applied in tax matters by the sovereign. This will be built on the analysis of sovereignty conducted in the initial part of Chapter 3. Before embarking on the journey to construct a new taxation model based on Pigovian economic theory, we will analyze how current tax systems interact with other (domestic) tax systems on an international level, including the supranational EU level (Section 4.2). Conclusions will be drawn that will help our efforts when constructing the building blocks of a Pigovian tax model. Such a model will be analyzed on its merits (Sections 4.7–4.10), including the ability to be used on a supranational level, as is the case within the EU, which will be further analyzed in Chapter 5. The Pigovian technique will be illustrated in its historical dimensions and its weaknesses elaborated on as the model has been refined and critiqued by scholars over time. While doing so, comparisons will be made vis-à-vis the current income tax-based models and the potential wider scope of applications and externalities that a Pigovian tax model could be applied to. Finally, emerging insights will be discussed with respect to the complexities of pricing externalities, potential alternatives and derivatives to the Pigovian model, and the neoliberal approach vis-à-vis externalities.

Keywords

Negative Externality Deadweight Loss Social Harm Direct Taxation Marginal Social Cost 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Notes

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