Chapter 10: A European single market without tax harmonization
It is very often said that it is not fair to accept competition between the producers of different countries – for instance those who belong to an economic union such as the European Union – if producers are not in the same environment. It is therefore suggested, for instance, to “harmonize” tax systems and/or regulations. However, it is completely wrong to believe that competition implies the existence of the same conditions of production. On the contrary, international trade exists because producers are different and placed in different environments. Moreover, one of the great merits of competition comes from the fact that it induces people to differentiate. Instead of a harmonization of taxes – with the risk that all countries could adopt the same harmful tax system – it is better to have tax competition so that the governments of some countries are induced to improve their tax systems in order to be more “competitive”. Economic harmony does not come from harmonization, but from diversity.
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