Globalization is transforming separate national economies into a single world economy. This process is occurring through rising trade and investment flows, greater labor mobility, and rapid transfers of technology. As integration increases, individuals and businesses are gaining freedom to take advantage of foreign economic opportunities. Individuals have more choices about where to work and invest, and businesses have more choices about where to locate their production, research, and headquarters facilities.

Many governments have responded to rising globalization with tax cuts to attract investment and spur growth. Individual income tax rates have plunged in recent decades, and more than two dozen nations have replaced their complex income taxes with simple flat taxes. At the same time, nearly every major country has slashed its corporate tax rate, recognizing that business investment has become highly mobile in today’s economy. That is the good news.

The bad news is that some governments and international organizations are trying to restrict tax competition. A battle is unfolding between those policymakers who want to maximize taxation and those who understand that competition is leading to beneficial tax reforms. If plans to stifle tax competition gain ground, growth will be undermined, governments will grow larger, and economic freedom will be curtailed.

More on International Tax Competition

Commentary

The Optimum Income Taxation

By Richard W. Rahn. Washington Times. October 20, 2014.

US Taxes Are Far Too High — No Wonder Companies Are Fleeing

By Daniel J. Mitchell. The Telegraph. August 29, 2014.

The Original Jersey (Cash Cow)

By Richard W. Rahn. Washington Times. August 4, 2014.

Cato Studies

OECD Launches New Effort to Undermine Tax Competition

By Daniel J. Mitchell. Tax and Budget Bulletin No. 68. March 12, 2013.

Spain Becomes One of Europe’s Highest Taxed Countries

By Juan Ramón Rallo, Ángel Martín Oro and Adrià Pérez Martí. Economic Development Bulletin No. 15. February 29, 2012.

U.S. Effective Corporate Tax Rate on New Investments: Highest in the OECD

By Duanjie Chen and Jack M. Mintz. Tax and Budget Bulletin No. 62. May 5, 2010.

Articles

The Iceland Tax System

Daniel J. Mitchell. Prosperitas. Vol. 7. No. 5. August 2007.

Public Filings

Dividend Taxation: Nearly All Major Nations Relieve Double Taxation

By Chris Edwards. Testimony. January 21, 2003.

Cato Reviews & Journals

Australia’s Regulatory ‘Bonfire’

Jeff Bennett and Susan E. Dudley. Regulation. Fall 2014.

Events

Internet Taxation: Should States Be Allowed to Tax outside Their Borders?

Featuring Daniel J. Mitchell. March 19, 2012. Capitol Hill Briefing.

The Case for Tax Competition, Fiscal Sovereignty, and Financial Privacy

Featuring Daniel J. Mitchell, Veronique de Rugy, Richard W. Rahn & Chris Edwards. October 20, 2009. Conference.

Tax Havens Should Be Celebrated, Not Persecuted

Featuring Daniel J. Mitchell and Richard W. Rahn. March 23, 2009. Capitol Hill Briefing.