Tax Harmonization and Tax Competition in Europe

Hans-Werner Sinn

No 3248, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Opening Europe's borders in 1993 makes the allocation of resources more vulnerable to differences in the national tax rates. The first part of the paper demonstrates that direct consumer purchases will imply distortions resulting from diverging VAT rates and it clarifies why the frequently cited exchange rate argument is of no help. The second part shows that, in the case of direct taxation, a harmonization of tax bases is more important than a harmonization of tax rates. Either the combination of true economic depreciation and residence taxation or the combination of immediate write-off and source taxation will result in an efficient international allocation of capital, independent of the national tax rates. The paper concludes with a verdict on tax competition arguing that free migration renders a policy of income redistribution, which is interpreted as insurance against the risk of lifetime careers, impossible.

Date: 1990-01
Note: ITI IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (161)

Published as European Economic Review, Vol. 34, pp. 489-504, (1990).

Downloads: (external link)
http://www.nber.org/papers/w3248.pdf (application/pdf)

Related works:
Journal Article: Tax harmonization and tax competition in Europe (1990)
Working Paper: Tax harmonization and tax competition in Europe (1990)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:3248

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w3248

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().