Tax competition, harmonization and development: challenges and consequences

Tax competition, harmonization and development: challenges and consequences


Marius Surugiu, Camelia Surugiu


Keywords: taxation; competition; harmonization; development; panel data; European Union; GMM method


Summary: This paper aims to emphasize the importance of tax harmonization and tax competition, both for a country’s economy and global economy development, which impact on governments’ adopted measures to attract investment, skilled labour force, etc. The relationship between the economic development of European countries, expressed as GDP per capita, and tax competition, expressed as implicit tax rate on capital is considered, using data for 1995-2009. The results indicate that tax competition is influenced by macroeconomic variables used (government deficit/surplus, government expenditure and openness), except for the level of GDP per capita (economic development) and government consolidated gross debt, which are not statistically significant.



Baldwin, R. E., Krugman, P., Agglomeration, Integration and Tax Harmonisation, “European Economic Review” 48, pp.1-23, 2004.

Becker, J., Fuest, C., EU Regional Policy and Tax Competition, “European Economic Review” 54, pp. 150-161, 2010.

Becker, J., Fuest, C., Tax Competition – Greenfield Investment versus Mergers and Acquisitions, “Regional Science and Urban Economics” 41, pp. 476-486, 2011.

Behrens, K., Hamilton, J. H., Ottaviano, G. I. P., Thisse, J. F., Commodity Tax Harmonization and the Location of Industry, “Journal of International Economics” 72, pp. 271-291, 2007.

Conconi, P., Perroni, C., Riezman, R., Is Partial Tax Harmonization Desirable?, “Journal of Public Economics” 92, pp. 254-267, 2008.

European Parliament, Tax Co-ordination in the European Union, Directorate-General for Research, WP, “Economic Affairs Series”, ECON 125 EN, December 2000, Fourçans, A., Warin T., Tax Harmonization versus Tax Competition in Europe: A Game Theoretical Approach, Université du Québec à Montréal, “Working Paper” No. 132, Center for Research on Economic Fluctuations and Employment, 2001,

Guscina, A., Effects of Globalization on Labor’s Share in National Income, International Monetary Fund, WP/06/294, 2006.

Hoek, M. P. v.d., Tax Harmonization and Competition in the European Union, eJournal of Tax Research, Vol. 1, No. 1, pp. 19-36, 2003.

Hristu-Varsakelis, D., Karagianni, S., Saraidaris, A. Equilibrium Conditions in Corporate Tax Competition and Foreign Direct Investment Flows, “Economic Modelling” 28, pp. 13-21, 2011.

Junevičius, A., Šniukštaitė, B., Tax Harmonization and Tax Competition in the European Union, “European Integration Studies”, No. 3, 2009,

Killian, S., Where’s the Harm in Tax Competition? Lessons from US Multinationals in Ireland, “Critical Perspectives on Accounting” 17, pp. 1067-1087, 2006.

Kocia, A., Tax System as a Factor Attracting Investment into the European Union Member Countries, Argumenta Oeconomica, No. 22, 2009.

Luna, L., Bruce, D. J., Hawkins, R. R., Maxing Out: An Analysis of Local Option Sales Tax Rate Increases, “National Tax Journal”, Vol. LX, No. 1, 2007.

Maşca, S. G.; Văidean, V. L. Golgut, A., Determinants of State Intervention: Evidence for the EU, “Transylvanian Review of Administrative Sciences”, No. 33 E/2011, pp. 150-169, 2011a.

Maşca, S. G.; Văidean, V. L.; Golguţ, A., The State and the Economy – Theoretical Aspects and Empirical Evidence for the EU, “Theoretical and Applied Economics”, Volume XVIII, No. 5(558), pp. 17-44, 2011b.

Mendoza, E. G.; Tesar, L. L., Why Hasn’t Tax Competition Triggered a Race to the Bottom? Some Quantitative Lessons from the EU, “Journal of Monetary Economics” 52, pp. 163-204, 2005.

Nandra, E. R., Fiscal Policy in the European Union between Harmonization and Competition, “Revista Tinerilor Economisti” [The Young Economists Journal], Year V – No. 9, Nov. 2007,

Pieretti, P., Zanaj, S., On Tax Competition, Public Goods Provision and Jurisdictions' Size, “Journal of International Economics” 84, pp. 124-130, 2011.

Schön, W., Tax Competition in Europe – General Report, [in:] Schön, W. (ed.), Tax Competition in Europe, International Bureau of Fiscal Documentation, European Association of Tax Law Professors, 2003.

Siklos, P. L., Determinants of Emerging Market Spreads: Domestic, Global Factors, and Volatility, Hong Kong Institute For Monetary Research, “HKIMR Working Paper” No. 18/2008, 2008.

Slemrod, J., Wilson, J. D., Tax Competition with Parasitic Tax Heavens, “Journal of Public Economics” 93, pp. 1261-1270, 2009.

Steichen, A., Tax Competition in Europe or the Taming of Leviathan, [in:] Schön, W. (ed.), Tax Competition in Europe, International Bureau of Fiscal Documentation, European Association of Tax Law Professors, 2003.

Szarowska, I., Tax Burden and Competition in the European Union Does it C?, MPRA Paper No. 19934, http://mpra.ub.uni-muenchen. de/19934/1/MPRA_paper_19934.pdf, 2009.

Weller, C. E., Rao, M., Can Progressive Taxation Contribute to Economic Development?, “Working Paper Series”, No. 176,, 2008.

Wilson, J. D., Wildasin, D. E., Capital Tax Competition: Bane or Boon?, Office of Tax Policy Research/Institute for Fiscal Studies Conference, "World Tax Competition," May 24-25, London, UK,, 2001.

Winner, H., Has Tax Competition Emerged in OECD Countries? Evidence from Panel Data, International Tax and Public Finance, 12, 5, pp. 667-687, 2005.

*** Harmful tax competition,

*** Glossary of Tax Terms , OECD,



Download PDF

Read 1900 times Last modified on Thursday, 27 February 2014 10:36