By: Leandra Lederman
On February 6, 2020, the Indiana University Maurer School of Law welcomed our second Tax Policy Colloquium guest of the year: Prof. Werner Haslehner from the University of Luxembourg’s Department of Law, who is currently a Global Research Fellow and adjunct professor at NYU Law School. Werner presented his draft essay titled “International Tax Competition—the Good, the Bad, and the Ugly.”
States of course compete for tax base. Werner’s essay explains that “States’ general freedom to act (which we may call sovereignty) and taxpayer’s freedom to choose (which we may call liberty) – although neither is without limits – inescapably lead to competitive pressures and reactions.” (p.4) And some of this competition has been labelled as “harmful” by the OECD, the European Commission, and others. Yet, the essay points out, there is no accepted definition of the phrase “harmful tax competition.” The essay briefly reviews the literature and points out differences in approach to defining this concept. This part of the essay draws in part on Lily Faulhaber’s compelling article, The Trouble with Tax Competition: From Practice to Theory, 71 Tax L. Rev. 311 (2018), which pointed out the lack of definitional consensus and offered a typology of tax competition.
Werner’s essay further argues that, as commonly understood, there is no economic standard that supports a distinction between “harmful” and other types of tax competition. The essay thus proposes to replace the phrase “harmful tax competition” with “unfair tax competition.” (p.13) The essay specifically proposes “to refer as a basis for such a constraint to one of the most salient principles of moral philosophy: Immanuel Kant’s categorical imperative. According to this norm’s first formulation, one is to ‘act only in accordance with that maxim through which one can at the same time will that it become a universal law’.” (p.16). The essay provides two examples of behaviors that would be considered “unfair” under this standard: (1) ring-fencing (the provision of a tax benefit only to foreigners, not domestic taxpayers) and (2) secrecy (which, in response to a question I posed, Werner clarified refers to “secrecy as a service”—assisting foreign taxpayers in tax evasion). Continue reading “IU Tax Policy Colloquium: Haslehner, “International Tax Competition—The Good, the Bad, and the Ugly””