Fiscal Harmonization: Credible Goal or Trojan Horse?

Enrico Colombatto ()
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Enrico Colombatto: Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy

No 10, Working papers from Department of Economics, Social Studies, Applied Mathematics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino

Abstract: The supply-side literature underscores two main concepts. Taxation usually harms growth and fiscal competition provides effective protection against excessive fiscal pressure. Understandably, governments tend to dislike fiscal competition, and strive to create fiscal cartels justified by the general principle of fiscal harmonization. This paper argues that, from the policymakers' standpoint, fiscal harmonization is inferior to automatic exchange of information among fiscal authorities and also to schemes of anonymous withholding taxes. By contrast, fiscal harmonization could be a useful instrument that international bureaucrats resort to in order to obtain fiscal centralization. We conclude that their chances to succeed largely depend on the rent-seeking strategies pursued by the national decision-makers and on the perceived legitimacy of the federal authorities.

Keywords: Laffer curve; taxation; fiscal harmonization; legitimacy; consensus; rent-seeking (search for similar items in EconPapers)
JEL-codes: H3 H7 H8 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2012-07
New Economics Papers: this item is included in nep-pbe
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