In a nutshell, this book presents a normative assessment of the phe-nomenon of tax competition. In itself, this is a novel contribution
to the literature. While different disciplines touch upon aspects of this project, they all remain incomplete in one way or another.
In political philosophy, the discussion of tax issues is only just beginning to move onto the intellectual agenda.16 Two promi-nent examples are Liam Murphy and Thomas Nagel’s The Myth of Ownership and Martin O’Neill and Shepley Orr’s edited volume, Political Philosophy and Taxation.17 Explicit references to the phe-nomenon of tax competition are few and far between among politi-cal philosophers.18
In economics or, more precisely, in public economics as the subdiscipline that deals with fiscal issues, the dominant criterion for assessing the practice of tax competition is efficiency. While there is no consensus on whether tax competition is efficient or not, almost all economic models propose to evaluate tax competi-tion exclusively in terms of this one dimension.19 One significant exception is Hans-Werner Sinn’s selection principle. While he par-ticipates in the debate about the efficiency of tax competition, he
16. For a useful overview, see Daniel Halliday, ‘Justice and Taxation’, Philosophical Com-pass 8, no. 12 (2013): 1111–22.
17. Liam Murphy and Thomas Nagel, The Myth of Ownership: Taxes and Justice (Oxford:
Oxford University Press, 2002); Martin O’Neill and Shepley Orr, eds., Political Philoso-phy and Taxation (Oxford: Oxford University Press, forthcoming).
18. Notable exceptions are Gillian Brock, ‘Taxation and Global Justice: Closing the Gap between Theory and Practice’, Journal of Social Philosophy 39, no. 2 (2008): 161–84;
Alexander Cappelen, ‘The Moral Rationale for International Fiscal Law’, Ethics & In-ternational Affairs 15, no. 1 (2001): 97–110; and Miriam Ronzoni, ‘The Global Order:
A Case of Background Injustice? A Practice-Dependent Account’, Philosophy & Public Affairs 37, no. 3 (2009): 229–56. Brock discusses challenges of international taxation similar to the ones at the heart of this book, yet her account of potential solutions differs in that she focuses on various kinds of global taxation rather than principles to make national taxation more effective. Cappelen analyses the current distribution of interna-tional rights to tax through the lens of theories of distributive justice. Ronzoni, whose work I shall discuss in more detail later, identifies tax competition as an instance of background injustice.
19. For a useful survey on the economic literature on tax competition, see Philipp Genschel and Peter Schwarz, ‘Tax Competition: A Literature Review’, Socio-Economic Review 9, no. 2 (2011): 339–70.
emphasizes that efficiency alone is too narrow a criterion to evalu-ate social practices.20
In political science, valuable work has been done to further our understanding of tax competition and of how it has become part of our institutional landscape without being intentionally created by anyone.21 Yet, what tends to be lacking in the politi-cal science perspective on tax competition is a normative vantage point that would allow us to justify a political and institutional response to the phenomenon. With a handful of exceptions, the same is true for otherwise very insightful contributions from international tax law.22
This book brings together strands from all four of these dis-ciplines23 and, consequently, aims to withstand scrutiny and criticism from all four. Yet, despite this clearly interdisciplinary orientation, this work is ultimately an exercise in economic philos-ophy. This means that my primary interest in this book lies in the normative underpinnings that we can provide not only for the way in which we design the international tax regime and, in particular,
20. Hans-Werner Sinn, The New Systems Competition, Yrjö Jahnsson Lectures (Oxford:
Blackwell, 2003).
21. To name but some examples, see Thomas Rixen, The Political Economy of International Tax Governance (Basingstoke: Palgrave Macmillan, 2008); Jason C. Sharman, Havens in a Storm: The Struggle for Global Tax Regulation (Ithaca, NY: Cornell University Press, 2006); Palan et al., Tax Havens; Richard Eccleston, The Dynamics of Global Economic Governance—The Financial Crisis, the OECD, and the Politics of International Tax Coop-eration (Cheltenham: Edward Elgar, 2013).
22. See, for instance, Reuven S. Avi-Yonah, ‘Globalization, Tax Competition, and the Fiscal Crisis of the Welfare State’, Harvard Law Review 113, no. 7 (2000): 1573–676. For the rare legal scholarship on international taxation that explicitly addresses normative questions, see Nancy H. Kaufman, ‘Fairness and the Taxation of International Income’, Law and Policy in International Business 29, no. 2 (1998): 145–203; as well as Allison Christians, ‘Sovereignty, Taxation, and Social Contract’, Minnesota Journal of Interna-tional Law 99 (2009): 99–153.
23. See also Peter Dietsch and Thomas Rixen, eds., Global Tax Governance—What is Wrong With It and How to Fix It (Colchester: ECPR Press, forthcoming).
for the regulation of tax competition, but also for the related ques-tions of efficiency, fiscal sovereignty, and redistributive obligaques-tions between states. My goal is to provide a unified normative frame-work in which all of these issues can be addressed both coherently and comprehensively.
At the same time, laying the normative foundations without constructing the institutional edifice on top of them would be un-satisfactory in its own way. The book explicitly proposes to bridge the gap between normative groundwork and the concrete institu-tional reforms that this groundwork necessitates and calls for. In doing so, it helps to fill an important gap in our thinking about global socio-economic arrangements. Consider the following question raised by Allen Buchanan and Robert Keohane in a paper on the legitimacy of global institutions: ‘What are the proper re-sponsibilities of states in the pursuit of global justice, taking into account the proper scope of state sovereignty (because this will determine how extensive the role of global institutions should be), and what are the capabilities of various global institutions for contributing to the pursuit of global justice?’24 Buchanan and Keo-hane argue that substantive answers to these questions are not yet available, in part because theorists have only recently turned their attention to them. As a consequence, Buchanan and Keohane’s ac-count of the legitimacy of global institutions holds back on sub-stantive criteria and focuses instead on what they consider to be the epistemic virtues of global institutions.
This book goes further. Regarding the fiscal context, I offer an answer to Buchanan and Keohane’s questions. Based on a norma-tive framework that allows me to take a position on the privileges
24. Allen Buchanan and Robert O. Keohane, ‘The Legitimacy of Global Governance Insti-tutions’, Ethics & International Affairs 20, no. 4 (2006): 418.
and responsibilities of states, as well as on questions of global jus-tice, I advance a regulatory framework for tax competition. The proposed framework will no doubt be controversial, but I unsur-prisingly agree with Buchanan and Keohane that this is exactly the type of thinking on global institutions that we need more of. One important characteristic of this kind of theorizing is that it com-bines work at different levels of abstraction. Being alert to feasibil-ity constraints is very important in this context. Ideal normative principles are of little use if they fall before the hurdle of moral or political feasibility.
Before moving on to a short primer on taxation, it is worth pausing to ask why questions of international taxation and of tax competition have not been on the radar of political philoso-phers. Traditionally, taxation has played an important role in the context of theories of distributive justice. Most of these theories appeal to redistributive tax-and-transfer regimes when it comes to implementing their ideal of a just society. The theories of John Rawls and Ronald Dworkin are paradigm examples of this kind of approach.25
The shift in the distributive justice literature from domestic justice to global justice that has taken place over the last twenty years has failed to pick up on the fact that the interactions between different tax systems have dynamics all their own. As we shall see in detail in chapter 1, tax competition between states tends to ex-acerbate income inequalities both within countries and between them, and thus poses questions of domestic, as well as global, jus-tice. In other words, political philosophers concerned with ques-tions about distributive justice both at the domestic and at the
25. See John Rawls, A Theory of Justice, 2nd ed. (Cambridge, MA: Belknap Press, 1999), 242–50; Ronald Dworkin, Sovereign Virtue: The Theory and Practice of Equality (Cam-bridge, MA: Harvard University Press, 2000), chap. 2.
global level must keep the dynamics of international taxation in mind. Taxation is not only the instrument of redistribution but also, at times, the source that gives rise to the obligation to redistribute in the first place. Indeed, recognizing this has been one of the main motivations behind my writing this book. This insight shifts our attention from the remedial approach via redistribution that has traditionally been favoured by theorists of justice to the question of how to rewrite the rules of the game in international taxation.