International Tax Competition: A New Framework for Analysis

  • Peter Birch Sørensen


Spurred by the liberalisation of capital flows and the launching of the EU single market and monetary union, the last two decades have witnessed an intense European and international debate on the need for supranational tax co-ordination. In recent years there has been a clear shift in the dominant opinion in this long-standing debate. Only a few years ago the European Commission expressed concern that international tax competition seems to shift the tax burden from mobile capital onto unemploymentridden labour. The Commission therefore argued for improved co-ordination of capital taxation within the EU to prevent further shifts in the tax burden to the disadvantage of labour. However, more recently the Commission has expressed the view that “... a reasonable degree of tax competition within the EU is healthy and should be allowed to operate. Tax competition may strengthen fiscal discipline to the extent that it encourages member states to streamline their public expenditure, thus allowing a reduction in the overall tax burden.” (European Commission, 2001, p. 4).


Foreign Direct Investment Labour Income Labour Supply Elasticity Effective Labour Supply 
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© Springer Science+Business Media New York 2003

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  • Peter Birch Sørensen

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