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 U.N. Has Absolutely No Idea How Economic Growth Works

By Daniel J. Mitchell. PanAm Post. April 17, 2017.

What If ISDS Lawsuits Were Used to Fight Climate Change?

By Simon Lester. Huffington Post. October 3, 2016.

Treasury’s Tax Regulations Will Dampen Domestic Investment

By Ike Brannon. The Weekly Standard. June 21, 2016.

Cato Studies

Taxation and the International Mobility of Inventors

By Ufuk Akcigit, Salomé Baslandze, and Stefanie Stantcheva. Research Briefs in Economic Policy No. 63. November 9, 2016.

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.

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

Global Tax Competition

Cato Handbook for Policymakers. Cato Handbook for Policymakers, 8th Edition (2017).

Australia’s Regulatory ‘Bonfire’

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

Events

Proven Strategies to Restrain Spending: An International Perspective

Featuring Daniel J. Mitchell. May 27, 2015. Capitol Hill Briefing.

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.