On the desirability and feasibility of
regulating tax competition
Peter Dietsch
Philosophy, Université de Montréal & Centre de recherche en éthique (CRE)
presentation at TAXCOOP 2015 conference
November 3rd 2015
The ethics of tax competition
3 questions:
1) What values for international tax governance?
=> fiscal autonomy (= minimalist approach)
2) How does tax competition affect fiscal autonomy?
=> undermining effect
3) What should we do about tax competition?
Definition & typology
Tax competition:
the interactive tax setting by independent governments in a
noncooperative, strategic way
3 types of tax competition:
1)to attract portfolio capital
=> tax evasion (illegal)
2)to
attract paper profits of multinationals
=> tax avoidance (mostly respects the letter of the law, but
violates its spirit)
3)to
attract foreign direct investment
=> considered within the rights of states
Definition & typology
Tax competition:
the interactive tax setting by independent governments in a
noncooperative, strategic way
3 types of tax competition:
1)to attract portfolio capital
=> tax evasion (illegal)
2)to
POACHING
attract paper profits of multinationals
=> tax avoidance (mostly respects the letter of the law, but
violates its spirit)
3)to
attract foreign direct investment
=> considered within the rights of states
Definition & typology
Tax competition:
the interactive tax setting by independent governments in a
noncooperative, strategic way
3 types of tax competition:
1)to attract portfolio capital
=> tax evasion (illegal)
POACHING
2)to
attract paper profits of multinationals
=> tax avoidance (mostly respects the letter of the law, but
violates its spirit)
3)to
attract foreign direct investment
=> considered within the rights of states
LURING
The challenge
1)
1)
Are current measures against poaching
effective?
- clear progress on tax evasion
- prospects for containing profit shifting not as
good
If they were effective, most OECD countries
would not adopt them
- Why not?
- substitutive relationship between poaching
and luring
Another look at luring
Parallel between tax policy and trade policy:
A low tax rate is just the flip side of a subsidy
The
WTO rules out subsidies to promote a level
playing field in international trade
We need constraints on luring, too
This does not imply harmonisation of tax rates, but it
does require harmonisation of tax rules
one proposal: the fiscal policy constraint
(Dietsch & Rixen, “Tax competition and global background
justice”, Journal of Political Philosophy 22/2 (2014), 150-77)
Conclusion
For reasons of political feasibility, as long as luring is
not part of the agenda of international tax reform, we
will not see an effective solution to the problem of
poaching.
For more details:
Peter Dietsch
Catching Capital – The Ethics of
Tax Competition
Oxford University Press, 2015