Tax competition `self-defeating'

Tax competition `self-defeating'

TWO LEADING ACADEMICS have argued that pan-European tax harmonisation would help reduce tax evasion. Writing in the latest issue of the Economic Journal, Professor Eckhard Janeba of Indiana University in Bloomington, and Professor Wolfgang Peters of European University Viadrina in Frankfurt, argue that tax competition between European countries is ultimately self- defeating. They say that competition for non-residents' income drives non-resident tax rates in the competing European countries down to zero. This "beggar thy neighbour" tax policy leaves everyone with lower levels of tax revenue.