Edited by Miriam L. Campanella and Sylvester Eijffinger
Chapter 2: EU governance under duress? Tax policy coordination under globalization
2. EU governance under duress? Tax policy coordination under globalization Mehmet Ugur INTRODUCTION One of the issues in the debate on globalization is the extent of policy arbitrage caused by cross-border mobility and the impact of this arbitrage on the quality of governance. This chapter aims to contribute to the current debate by developing and testing a political economy model of the relationship between globalization and governance quality. The proposed model assumes strategic interaction between the state and non-state actors in a world divided into jurisdictions that compete for the loyalty of the non-state actors. It predicts that globalization, understood as increased cross-border mobility of the non-state actors, does not necessarily undermine governance quality provided that the policy issues are transparent and divisible. We deﬁne governance as the supply by a public authority of rules, procedures and codes of conduct that regulate the interaction between state and non-state actors. The quality of governance is deﬁned as the extent to which the public authority supplies these public goods in an eﬃcient and non-discriminatory manner. In this context, governance quality is an indicator of the extent to which the public authority is not captured either by state bureaucracy or by non-state actors. (For similarity and diﬀerences between this deﬁnition and others discussed by the EU Commission and the European Bank for Reconstruction and Development, see European Commission, 2001; Hellman and Schankerman, 2000). One strand in the globalization and integration debate argues that increased cross-border mobility would lead...
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