NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Tax Harmonization and Tax Competition in Europe

Hans-Werner Sinn

NBER Working Paper No. 3248 (Also Reprint No. r1488)
Issued in January 1991
NBER Program(s):   ITI   IFM

Opening Europe's borders in 1993 makes the allocation of resources more vulnerable to differences in the national tax rates. The first part of the paper demonstrates that direct consumer purchases will imply distortions resulting from diverging VAT rates and it clarifies why the frequently cited exchange rate argument is of no help. The second part shows that, in the case of direct taxation, a harmonization of tax bases is more important than a harmonization of tax rates. Either the combination of true economic depreciation and residence taxation or the combination of immediate write-off and source taxation will result in an efficient international allocation of capital, independent of the national tax rates. The paper concludes with a verdict on tax competition arguing that free migration renders a policy of income redistribution, which is interpreted as insurance against the risk of lifetime careers, impossible.

download in pdf format
   (192 K)

email paper

This paper is available as PDF (192 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Published: European Economic Review, Vol. 34, pp. 489-504, (1990).

Users who downloaded this paper also downloaded these:
Razin and Sadka w3152 International Tax Competition and Gains from Tax Harmonization
Ballard, Scholz, and Shoven The Value-Added Tax: A General Equilibrium Look at Its Efficiency and Incidence
Mendoza and Tesar w10051 Winners and Losers of Tax Competition in the European Union
Hansen Challenges in Identifying and Measuring Systemic Risk
McLure Harmonizing Corporate Income Taxes in the European Community: Rationale and Implications
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us