Global Financial Governance and Tax Competition

Abstract

Sovereignty, and the sovereign right to tax (or not), rest within the structure of the state. This state-centric perspective may be subject to criticism for ignoring other, non-state, influences on the lives of citizens.¹ However, the situation prevails that it is the state, with its attendant structures and institutions, which remains concerned with the well-being of its residents and citizens. Whether that concern involves a minority or a majority, nevertheless revenue is required to satisfy expectations for political goods. State revenue is generally collected via either tariffs or taxes, yet the scale and extent of this collection may be manipulated to achieve a variety of purposes beyond simply government operations. This manipulation may be intended to attract new or additional sources of revenue to the state. These efforts lead observers to characterize the result as a ‘competitive’ state, for the government strives to enhance the political goods available to its citizens, while competing with other states (who also seek to enhance their public’s welfare).² Among the political goods pursued are jobs (or full employment), improved infrastructure, improved educational opportunities, and additional business opportunities ancillary to the investment attracted to the state.

He will place a tax on the air you breathe and on the bread you eat; he will give you a legislation which is as legitimate as it is unjust and instead of reasons, he’ll give you laws. These will grow in the course of time, until you no longer exist for yourselves but for others.

— Franz Grillparzer, Libussa, Act 2 (1872)