From the Firm to Economic Integration
Chapter 8: The case against “tax harmonization”
There is an apparent contradiction in the present world between, on the one hand, the fact that human activities are more and more globalized, whereas, on the other hand, tax systems remain strictly national (or local). For many people such a discrepancy is not acceptable and they argue in favor of more globalized tax systems, which, in their opinion, means either harmonization of taxes or even the creation of world taxes and, at least, some cooperation between national tax administrations. But such claims are based on a false interpretation of what globalization is. In fact, globalization can be defined as competition at the global level. Now, competition does not imply that activities become more and more similar all around the world, quite the contrary. As a “process of discovery,” competition causes producers to differentiate one from the other. Therefore, from this very general point of view, if ever, in a globalized world, one would consider that tax systems also have to be globalized, it would imply tax competition and tax differentiation and not tax harmonization or global taxation.
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