ArticlePDF Available

Redistribution, Globalisation, and Multi-level Governance



Global income inequalities are met with increasing calls for direct supranational redistribution. This article argues that from the perspective of political feasibility, this approach should not be prioritised. We use the example of tax competition to show that supranational regulation that stops short of direct redistribution has better chances of being implemented. Moreover, as the case of tax competition illustrates, such regulation can help to shore up the capacity of nation states to redistribute internally, which indirectly tends to reduce global inequalities, too. Against this background, we formulate the conditional subsidiarity principle of redistribution. It states that when the case for direct supranational redistribution is built on the alleged incapacity of the state to redistribute due to the pressures of globalisation, our first instinct should be regulatory reform in order to restore this capacity. Finally, the article asks whether two prominent proposals for global taxation – the global resource dividend and the financial transaction tax – pass the test of the conditional subsidiarity principle.
Peter Dietsch* and Thomas Rixen
Redistribution, Globalisation, and
Multi-level Governance
Abstract: Global income inequalities are met with increasing calls for direct
supranational redistribution. This article argues that from the perspective of
political feasibility, this approach should not be prioritised. We use the example
of tax competition to show that supranational regulation that stops short of
direct redistribution has better chances of being implemented. Moreover, as the
case of tax competition illustrates, such regulation can help to shore up the
capacity of nation states to redistribute internally, which indirectly tends to
reduce global inequalities, too. Against this background, we formulate the
conditional subsidiarity principle of redistribution. It states that when the case
for direct supranational redistribution is built on the alleged incapacity of the
state to redistribute due to the pressures of globalisation, our first instinct
should be regulatory reform in order to restore this capacity. Finally, the article
asks whether two prominent proposals for global taxation the global resource
dividend and the financial transaction tax pass the test of the conditional
subsidiarity principle.
*Corresponding author: Peter Dietsch, Département de Philosophie, Université de Montréal,
C.P.6128, Succursale Centre-ville, Montréal, QC H3C 3J7, Canada, E-mail:
Thomas Rixen, Fakultät für Sozial- und Wirtschaftswissenschaften, Universität Bamberg,
Bamberg, Germany, E-mail:
Notwithstanding the mitigating effect of the emergence of a Chinese middle
class in recent years,
indicators of global income inequalities still offer a
bleak picture.
At the national level, the determination to fight inequalities
1See e.g. Pogge, Thomas, Growth Is Good! But What Growth?in Social Justice, Global
Dynamics: Theoretical and Empirical Perspectives, ed. Ayelet Banai, Miriam Ronzoni and
Christian Schimmel (London: Routledge, 2011), 7794.
2Milanovic, Branko, The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global
Inequality (New York: Basic Books, 2011), chapter 2.
doi 10.1515/mopp-2013-0013 MOPP 2014; 1(1): 6181
Bereitgestellt von | Universitaet Bamberg
Angemeldet | Autorenexemplar
Heruntergeladen am | 12.05.14 10:46
seems even to have weakened. Paradoxically, while national income inequalities
have been on the rise again for the last 40-odd years in many countries after
having declined between the Great Depression and the 1960s, the tax systems of
these countries have become more regressive.
That is, rather than counteracting
rising inequalities, a reduced tax burden on the rich has compounded them
in many places. If one thinks that political preferences and conceptions of
social justice have not changed accordingly to legitimate these changes, this
development presents us with a puzzle.
The common answer to the puzzle is that the growing economic interdepen-
dence of countries, referred to as globalisation, not only creates more inequality
in the primary distribution but also undermines the capacity of the state to
redistribute and bring about a more equal post-tax distribution.
A number of
policy proposals to rectify this situation argue that supranational tax and
transfer mechanisms need to be created to fill the void. This article presents a
critical analysis of this position and suggests an alternative approach to the
puzzle. Put differently, we inquire whether any general statements can be
made about the level of governance national or supranational at which
redistributive policies should be pursued.
Our central arguments can be summarised as follows. First, we contest the
empirical claim that globalisation necessarily undermines the redistributive
capacity of the state. While it contingently does so under certain regulatory
frameworks, including the present one, globalisation is not incompatible with
national redistributive policies as such. Second, while national redistribution
only represents a partial step towards global justice, we argue that it is impor-
tant to indeed take this partial step through national rather than supranational
tax and transfer mechanisms. The justification for this argument lies in feasi-
bility considerations. In sum, we defend what we will call a conditional sub-
sidiarity principle for redistribution under multi-level governance: When the case
for supranational redistribution arises from the alleged failure of states to
redistribute, our first instinct should be to restore the redistributive capacity of
the state by changing the regulatory framework under which globalization
operates before turning to direct redistribution at the supranational level.
The article connects work on global justice in political philosophy with
international tax theory in public economics. To ensure that the premises of
our argument from both of these disciplines are clear, we start with two
3OECD, Divided We Stand: Why Inequality Keeps Rising (Paris: OECD, 2011).
4Due to lack of space, we cannot discuss the reasons why globalization creates inequalities
and undermines statesredistributive capacities. For an entry point to the relevant literature, see
e.g. ibid., chapter 2.
62 P. Dietsch and T. Rixen
Bereitgestellt von | Universitaet Bamberg
Angemeldet | Autorenexemplar
Heruntergeladen am | 12.05.14 10:46
preliminary sections. The first of these presents a primer on taxation that serves
to delineate redistribution from other objectives of fiscal policy. The second
section sets out the relation between ones theory of (global) justice and the
role of fiscal policy in realising the ideal of justice in question. We then, in the
third section, analyse the impact that globalisation has on this relation between
justice and fiscal policy. In this central part of the article, we introduce and
defend the conditional subsidiarity principle for redistribution under multi-level
governance. Finally, in Section 4, we ascertain the implications of this principle
for two global taxation proposals that have been put forward in recent years.
1 A primer on taxation
Before thinking about redistributive taxation in a global setting, it is useful to
rehearse a few preliminary points that apply to taxation in general, that is,
independently of the level of governance. Three questions are addressed: Why
do we tax? What do we tax? And who taxes?
Why do we tax? Three central goals of taxation have been identified.
taxes raise revenue to finance government spending. Taxing and spending serve
an allocative function focused on those areas where market allocation does not
lead to efficient results, including the provision of public goods, addressing
externalities, competition policy, etc.
Of course, it will often be controversial in
how far government intervention actually serves those purposes. The decision
ought to be made democratically. Second, taxes represent an instrument to
redistribute income and wealth to promote the conception of social justice that
has been chosen through the democratic process. Note that the revenue and the
spending side contribute to redistribution. The progressivity or regressivity of a
fiscal regime can only be evaluated by taking into account both. Third, fiscal
policy is traditionally used to stabilize and smooth the business cycle by tighten-
ing policy during boom years and pursuing expansionary policies during eco-
nomic busts. This third goal of fiscal policy will only play a secondary role in the
argument of this article.
5Musgrave, Richard A., and Peggy B. Musgrave, Public Finance in Theory and Practice (New
York: McGraw-Hill, 1989).
6Note that this allocative function includes the provision of the necessary legal infrastructure
of markets (property rights, judicial review etc.), which can itself be understood as a public
good. See North, Douglass C., Structure and Change in Economic History (New York: Norton,
Redistribution, Globalisation, and Multi-level Governance 63
Bereitgestellt von | Universitaet Bamberg
Angemeldet | Autorenexemplar
Heruntergeladen am | 12.05.14 10:46
What do we tax? The elements of the modern tax base can be described in
different ways.
For the purposes of this article, we will classify taxes according
to the direct taxes on three factors of production land, labour, and capital. A
tax can be levied both on the flow of income generated a capital gains tax, for
example and on the stock of the factor of production in question a wealth
tax, for example. Once again, this article posits that the particular choices of
what should be taxed are to be deferred to the democratic process. One obvious
desideratum for any tax system is that it should have effective control over the
various elements of its tax base. This aspect will play a central role in our
Who should tax? The objectives of taxation can be pursued at different levels
of governance. Based on public economics alone, we can only give a partial
response to the question of which level it should be. The part that public
economics can speak to concerns the first goal of taxation, its allocative func-
tion. The power to tax in order to provide public goods should ideally be
situated at the level of government that best reflects the reach of the benefits
provided and burdens imposed. This principle of fiscal equivalence
that all beneficiaries of certain government activities can be made to share the
costs. It is a condition for an efficient provision of public goods. Normatively
speaking, the principle ensures that those subject to the rules are also their
authors. The question of which group of people needs to be subjected to the
rules depends on the phenomenon at hand. While it makes sense to finance
garbage collection through municipal taxes, for instance, in other cases either
the mobility of a factor of production capital, for example or the externalities
of an activity emitting pollutants, for example call for the public policy
response to be shifted to a higher level of governance. Fiscal equivalence is
achieved if the power to tax is subject to the principle of subsidiarity that requires
a government function to be located at the lowest possible level that includes
both the beneficiaries and cost bearers. This principle is attractive because it
combines democratic accountability (inclusion of all affected interests and
closeness of decision-makers and citizens) and efficiency (coincidence of bene-
fits and costs).
By contrast, public economics on its own cannot give us a satisfactory
answer to the question of who should tax when it comes to the second goal of
taxation, that is, redistribution. Here, the principle of subsidiarity needs to be
7For an overview, see Musgrave and Musgrave, Public Finance in Theory and Practice (Part V).
8Olson, Mancur, The Principle of Fiscal Equivalence: The Division of Responsibilities among
Different Levels of Government,American Economic Review, 59, 2 (1969): 47987.
9Oates, Wallace E., Fiscal Federalism (New York: Harcourt Brace Jovanovich, 1972).
64 P. Dietsch and T. Rixen
Bereitgestellt von | Universitaet Bamberg
Angemeldet | Autorenexemplar
Heruntergeladen am | 12.05.14 10:46
complemented with a normative foundation that justifies why redistribution
should take place at a certain level of governance rather than another.
Whereas in the allocative context, the principle of subsidiarity can appeal to
functionalist considerations and hence seems to act as a stand-alone principle,
this move is not available in the redistributive context. As we shall see in the
next section, the normative foundation subsidiarity requires in the redistributive
context is a theory of (global) justice.
A closer look at the present section reveals a hierarchical order between the
three questions discussed. The question of why we tax is more fundamental in
nature than the other two. The above considerations on the issue of who should
tax, in particular, clearly show that responding to this question inevitably sends
us back to the first question of why we tax. A satisfactory answer to the question
of why we tax requires a theory of justice, particularly in the context of redis-
tribution. It is to this normative part of the puzzle that we now turn.
2 Justice, redistribution, and feasibility
Viewed through the lens of theories of justice, the questions of the level of
governance at which redistribution should occur, and why, appear straightfor-
ward. After all, it is precisely the point of a theory of justice to determine the
relative benefits and burdens of different individuals and groups in society.
Therefore, the normative case for redistribution at any given level of governance
flows directly from the theory of justice one holds.
To illustrate, consider the following non-comprehensive list of theories of
global justice and their implications for fiscal transfers at different levels of
governance. First, take a cosmopolitan theory of justice that proposes a number
of egalitarian principles of justice among all people in virtue of their common
; second, take a left-libertarian theory that requires equal distribution
10 This is not always true. For example, decisions about the level of governance at which
health or education policies and hence their funding through the tax system should be
situated are also dependent on normative premises. Against this background, the difference
between the allocative and the redistributive context turns out to be one of degree. In the
redistributive context, subsidiarity requires thickernormative premises, whereas in the allo-
cative context it can rely on relatively thinones.
11 For the idea that subsidiarity is secondary to general principles of justice, see also
Gosepath, Stefan, The Principle of Subsidiarity,inReal World Justice, ed. Andreas Follesdal
and Thomas Pogge (New York: Springer, 2005), 15770, p. 170.
12 See e.g. Caney, Simon, Justice Beyond Borders: A Global Political Theory (Oxford: Oxford
University Press, 2006).
Redistribution, Globalisation, and Multi-level Governance 65
Bereitgestellt von | Universitaet Bamberg
Angemeldet | Autorenexemplar
Heruntergeladen am | 12.05.14 10:46
of natural resources, or the benefits thereof, among all human beings.
Both of
these normative positions have in common that they require not just suprana-
tional coordination, but a global fiscal apparatus of substantial cross-border
taxes and transfers to realise their ideal of justice. Third, take a statist theory of
justice that holds that the coercive framework of the state is a necessary condi-
tion for the existence of egalitarian principles of justice
; fourth, take another
flavour of the statist position that sees reciprocal provision of certain basic
public goods as a necessary condition for the existence of egalitarian principles
of justice.
For both of the latter views, there may be humanitarian duties of
assistance across borders, but there are no sufficiently thick principles of global
justice to warrant the creation of a global fiscal apparatus. While even these
views might call for some level of supranational coordination, they will stop
short of substantial direct redistribution at the supranational level. On the
spectrum of theories of global justice we have just set out, a number of inter-
mediate positions are possible, too.
This characterisation obviously does not do justice to the various positions
invoked, but the important point in the present context is to establish that the
answer to the question of who should redistribute flows directly from ones
theory of global justice.
Now, consider the following observation. If the principal level of political
decision making is situated at a lower level of governance compared to the
scope of redistribution that ones theory of justice calls for, this asymmetry
creates a considerable political obstacle to the realisation of the theory of justice.
For example, when the state represents the locus of central political control, this
poses a problem for the implementation of, say, a cosmopolitan theory of justice
that calls for substantial redistribution beyond the state. This is precisely the
predicament encountered by the strategy described in the introduction in
response to global inequalities. Attempting to meet global inequalities with
global tax and transfer mechanisms is an effective proposal in the context of
ideal theory, that is, when agents are motivated to respect the demands of
justice placed upon them. In non-ideal circumstances, however, this strategy
faces a serious feasibility constraint. A situation where the theoretical demands
13 See e.g. Vallentyne, Peter, Left-Libertarianism: A Primer,inLeft-Libertarianism and Its
Critics: The Contemporary Debate, ed. Peter Vallentyne and Hillel Steiner (Basingstoke:
Palgrave, 2000), 120.
14 See e.g. Blake, Michael, Distributive Justice, State Coercion, and Autonomy,Philosophy
and Public Affairs, 30, 3 (2001): 25796.
15 See e.g. Sangiovanni, Andrea, Global Justice, Reciprocity, and the State,Philosophy &
Public Affairs, 35, 1 (2007): 139.
66 P. Dietsch and T. Rixen
Bereitgestellt von | Universitaet Bamberg
Angemeldet | Autorenexemplar
Heruntergeladen am | 12.05.14 10:46
of justice are global but the politics remain steadfastly national is a prime
example for such a non-ideal context. Unless the citizens of the transferring
state have internalized the theory of justice that calls for the transfer, the fact
that the decision to pay the transfer lies with them while the potential recipients
do not have a say means that the transfer is very unlikely to happen.
Three comments need to be added here. First, the existence of this feasibility
constraint does not weaken the normative case for redistribution as such. While
this would be the case if the feasibility constraint in question were of a hard
kind, for example if it were physically impossible to meet the demand of justice,
asoftfeasibility constraint does not undermine the duty in question.
political feasibility constraint in the present context is softin the sense of
socially contingent. Arguably, a cultural change could bring about a world in
which the asymmetry between national politics and global redistribution is
overcome. In this world, individuals have internalised the theory of global
justice in question and vote for redistribution beyond their borders.
Second, if such a world seems remote from our standpoint today, this does
not weaken the normative case for redistribution as we just pointed out, but it
might modify the content of the duty it engenders. As Gilabert has pointed out in
his innovative work on dynamic duties, if a feasibility constraint prevents us
from discharging duty X at time t
, we may still have a duty Y to do something
that will increase our likelihood of being able to discharge duty X at time t
For instance, if the realisation of cosmopolitan duties of justice that call for
cross-border redistribution is beyond our reach today, we may still have a duty
to change the political environment such that their realisation will become
possible in future.
Third, theories of justice that aspire to changing the world for the better
should take feasibility constraints seriously. If they do not, they open themselves
up to the criticism of being utopian. Accepting the significance of feasibility
constraints has practical consequences. Notably, if a duty of justice to redis-
tribute can be discharged in different ways, we should favour the actions and
policies that face the weakest feasibility constraints.
We now have all the building blocks from both political philosophy and
public economics in place to put them together. The next, core section of the
article will ask whether there are any general statements that can be made about
the level of governance at which redistributive policies should be implemented
under conditions of globalisation. In pursuing this inquiry, we do not
16 For this distinction between different kinds of feasibility constraints, see section 4.2 of
Gilabert, Pablo, From Global Poverty to Global Equality (Oxford: Oxford University Press, 2012).
17 Ibid., section 4.6.
Redistribution, Globalisation, and Multi-level Governance 67
Bereitgestellt von | Universitaet Bamberg
Angemeldet | Autorenexemplar
Heruntergeladen am | 12.05.14 10:46
presuppose any particular theory of global justice. On the contrary, we explicitly
aim to arrive at conclusions that hold independently of the theory of global
justice one might endorse.
3 The effect of globalisation on inequality
How does the phenomenon of globalisation complicate the accounts from tax
theory and from theories of global justice we have presented in the two previous
sections? What should be our normative and political response to the distributive
and institutional effects of globalisation? To answer these questions, we will first
briefly illustrate a set of problems globalisation causes in the fiscal context. In
particular, we will show that certain aspects of globalisation do indeed undermine
the redistributive capacity of the state under the status quo (Section 3.1). Second,
we will show that this effect of globalisation is contingent on the regulatory
framework. There are alternative regulatory frameworks available, under which
globalisation does not undermine the redistributive capacity of the state (Section
3.2). While the necessary reforms to put in place these regulations do require
supranational cooperation, they do not imply direct redistribution at the suprana-
tional level. On this basis, we will derive the conditional subsidiarity principle for
redistribution under multi-level governance (Section 3.3).
There are two motivations for why one may want to advocate shifting
redistributive policies to a higher level of governance. The first of these has
already been discussed in Section 2. If you hold a theory of justice that calls for
redistribution beyond the boundaries of the principal level of political decision-
making e.g. if you are a cosmopolitan living in a statist world then you will
advocate rectifying this asymmetry by shifting fiscal competences up the ladder
of governance. Call this the normative motivation.
The second reason to advocate shifting redistributive policies to a higher
level of governance is invoked by the common approach to globalisation men-
tioned in the introduction. Increasing economic interconnectedness, so the
argument runs, tends to both increase inequalities and undermine the redistri-
butive capacity of the state. Because the state can no longer effectively fulfil its
redistributive role, this task has to be handed to a supranational body. Call this
the functionalist motivation. This argument presents us with a version of the
subsidiarity argument in the redistributive context. Note that this response to
globalisation is subject to the political feasibility constraint discussed in Section
2. Shifting redistributive competences up the ladder of governance while the
state remains the prime locus of political decision-making is a long shot.
68 P. Dietsch and T. Rixen
Bereitgestellt von | Universitaet Bamberg
Angemeldet | Autorenexemplar
Heruntergeladen am | 12.05.14 10:46
If this analysis of the impact of globalisation on redistribution were correct,
then we would indeed have to take that long shot. Yet, we submit that this
analysis is inadequate. Its error lies in the empirical premises. Is it really the
case that the state can no longer effectively play its redistributive role? What if it
could? In the next two sections, we will show that, in the realm of taxation, the
impact of globalisation on redistribution is in fact contingent on the regulatory
framework that the forces of globalisation are subject to.
3.1 Globalisation and national tax policies under the
regulatory status quo
In fiscal policy, globalisation manifests itself in the form of tax base mobility.
Once national economic borders are open, tax bases are in principle free to
leave. One reason for economic agents to shift tax bases elsewhere is to reduce
their tax bill. This in turn provides incentives for governments to offer tax
savings to such mobile factors. The result will be tax competition, that is, the
interactive tax setting by independent governments in a non-cooperative,
strategic way.
Among the three tax bases introduced in Section 1 land,
labour, and capital tax competition occurs primarily with respect to the
most mobile of the three, that is, capital. In what follows we will very briefly
describe how capital tax competition works, and what its distributive conse-
quences are.
We can distinguish between virtualand realtax competition. Under
virtual competition taxpayers do not actually have to move to the country with
the lower or zero tax rates, it is only their capital that changes jurisdiction. They
may enjoy the public goods provided in high-tax countries but pay the taxes of
low- or zero-tax countries they behave as free riders. The corresponding
behaviour of governments trying to attract foreign tax base has been labelled
poachingby the OECD.
Two kinds of poaching are relevant. First, in the area
of portfolio capital, so-called tax havens have low or zero tax rates. More
importantly, they offer strict bank secrecy rules as well as certain legal
18 Wilson, John D., and David E. Wildasin, Capital Tax Competition: Bane or Boon,Journal of
Public Economics, 88, 6 (2004): 106591.
19 For a more detailed discussion of these issues, see e.g. Dietsch, Peter, and Thomas Rixen,
Tax Competition and Global Background Justice,Journal of Political Philosophy, Article first
published online: 23 April 2012, DOI: 10.1111/j.1467-9760.2012.00419.x, section I and Rixen,
Thomas, The Political Economy of International Tax Governance (Basingstoke: Palgrave/
Macmillan, 2008), chapters 4, 6 and 8.
20 OECD, Harmful Tax Competition: An Emerging Global Issue (Paris: OECD, 1998).
Redistribution, Globalisation, and Multi-level Governance 69
Bereitgestellt von | Universitaet Bamberg
Angemeldet | Autorenexemplar
Heruntergeladen am | 12.05.14 10:46
constructs such as trusts that enable individuals to hide their ownership vis-à-
vis the tax administrations in their state of residence, where they are liable to
tax. Estimates of the wealth hidden in tax havens are as high as 2132 trillion
Taxpayersbehaviour in these cases constitutes illegal tax evasion.
However, since under the current international tax rules there is no obligation
on governments to report foreign wealth held in their country to the investors
home country, unless the home country explicitly requests information and
presents specific initial evidence of tax evasion, this kind of competition to
attract tax evadersmoney is possible.
Second, governments compete for so-called paper profits. Through various
techniques, such as manipulating transfer prices (especially of intangible assets)
and thin capitalization, multinational enterprises (MNEs) can assign profits
made in high-tax countries to their subsidiaries in low-tax countries without
relocating real business activity. Such tax planningof MNEs generally con-
stitutes legal tax avoidance and is possible because the current system of taxing
multinational enterprises is based on the principle that national subsidiaries of
MNEs prepare their own tax accounts as if they were independent firms (sepa-
rate entity accounting). All empirical investigations into this issue come to the
same conclusion: the transfer of taxable profits is very sensitive to taxation,
companies make ample use of these possibilities, and governments compete for
the assignment of paper profits by lowering their nominal corporation tax
By contrast, under realtax competition, taxpayers actually have to relo-
cate to enjoy lower taxes. Countries compete for foreign direct investment (FDI)
in the form of real business activity, that is, they try to influence the location
decisions of MNEs. This practice may be called luring. Business decisions
depend on various factors such as the level of education, the costs of labour,
and the quality of infrastructure. But the effective tax burden also plays a role.
Empirical studies come to the conclusion that lowering effective tax rates
21 Tax Justice Network (TJN), The Price of Offshore Revisited. New Estimates for Missing
Global Private Wealth, Income, Inequality and Lost Taxes,
upload/pdf/Price_of_Offshore_Revisited_120722.pdf (accessed 14 August 2012).
22 In fact, until recently tax havens were not even obliged to respond to requests for informa-
tion. Following the financial crisis, the G 20 and OECD pressured tax havens to accept a new
standard of information exchange where the requested state has to provide information, as long
as the request is specific enough. See OECD, Tax Transparency 2011. A Report on Progress,
2011. (accessed 18 February 2014).
23 De Mooij, Ruud A., and Sjef Ederveen, Corporate Tax Elasticities: A Readers Guide to
Empirical Findings,Oxford Review of Economic Policy, 24, 4 (2008): 68097.
70 P. Dietsch and T. Rixen
Bereitgestellt von | Universitaet Bamberg
Angemeldet | Autorenexemplar
Heruntergeladen am | 12.05.14 10:46
increases the inflow of FDI.
Such real competition for FDI is possible because
under the current system of international taxation the corporation tax on the
profit earned is often the only tax due on that profit.
Both virtual and real tax competition have consequences for public
finances. In OECD countries, nominal corporate tax rates have fallen from an
average of 50% in 1975 to 25.7% in 2010. Over the same period, nominal top
personal income tax rates have fallen from 70% to 41.4%.
These rate cuts were
refinanced by broadening the bases on which taxes are applied (tax cut cum
base broadening). As a result, tax revenue as a percentage of GDP remained
stable, and the capacity of OECD governments to provide public goods has not
been compromised.
The situation is different in developing countries, largely because they lack
the administrative capacity to pursue revenue-stabilising policies.
A significant
part of the revenue loss is directly due to the shifting of paper profits. One study
estimates the annual revenue loss of developing countries from transfer pricing
to be US $ 160 billion.
In other words, globalization and tax competition make
it harder for developing countries to promote allocative efficiency through the
provision of public goods. Their experience is closer to the race-to-the-bottom
predicted by economic theory.
While the evidence on the impact of tax competition on the allocative
function of taxation varies with the stage of development of countries, the
verdict with respect to the distributive function is much clearer. The tax cut
cum base broadeningpolicy affects the distribution of the tax burden among
different kinds of taxpayers. For one, there is an effect within the business
sector: highly profitable MNEs benefit, while nationally organized small- and
medium-sized enterprises are more heavily burdened. Second, the tax burden is
shifted from capital to labour. This is also visible in the general trend to increase
24 De Mooij and Ederveen, Corporate Tax Elasticities: A Readers Guide to Empirical
25 If all countries operated a credit system without deferral, then tax competition among source
countries would be dampened, see e.g. Zodrow, George R., Capital Mobility and Source-Based
Taxation of Capital Income in Small Open Economies,International Tax and Public Finance,13
(2006): 26994.
26 See OECD Tax Database at (accessed
18 February 2014).
27 Keen, Michael, and Alejandro Simone, Is Tax Competition Harming Developing Countries
More Than Developed?Tax Notes International, 34, 28 June (2004): 131725.
28 Christian Aid, Death and Taxes: The True Toll of Tax Dodging (London, 2008), http://www. (accessed 18 February 2014).
Redistribution, Globalisation, and Multi-level Governance 71
Bereitgestellt von | Universitaet Bamberg
Angemeldet | Autorenexemplar
Heruntergeladen am | 12.05.14 10:46
indirect taxes, such as consumption taxes. Last but not least, due to the back-
stop function of the corporate for the personal income tax a lower corporate tax
rate often spills over into a flatter personal income tax structure.
In sum,
governments feel compelled to pursue less redistributive polices than they
would otherwise have pursued. These trends hold for both developed and
developing countries and show that, indeed, globalisation undermines the
redistributive capacity of the nation state under the current regulatory
While less clear cut, a case can also be made that tax competition under-
mines the capacity of national governments to effectively exercise the stabiliza-
tion function. The various opportunities for tax arbitrage contribute to the waves
of hot money rolling around the globe in search of the best return on invest-
The mobility of this hot money exacerbates investment cycles. As a
result, we see more volatile business cycles with at least in the case of
developing countries fewer means available to smooth them.
To conclude, the lack of effective tax authority over capital that is induced
by globalisation can be shown to undermine all three traditional functions of
taxation at the national level. In addition, as developing countries are hit harder
by the forces of tax competition, it also increases inequality across countries.
3.2 An alternative regulatory framework for international
Elsewhere, we have put forward a regulatory framework designed to regulate tax
competition and to address both cases of poaching and of luring.
Here, we will
not set out this framework in detail, but limit ourselves to a brief summary to
show that the consequences described in the previous section are indeed con-
tingent on the existing rules of international taxation. The proposed regulatory
change could restore the redistributive capacity of nation states and also address
the inequalities between countries to some extent.
29 Loretz, Simon, Corporate Taxation in the OECD in a Wider Context,Oxford Review of
Economic Policy, 24, 4 (2008): 63960, Schwarz, Peter, Does Capital Mobility Reduce the
Corporate-Labor Tax Ratio?Public Choice, 130, 34 (2007): 36380, Ganghof, Steffen, and
Philipp Genschel, Taxation and Democracy in the EU,Journal of European Public Policy, 15, 1
(2008): 5877.
30 For an analysis of capital mobility in this light, see Eichengreen, Barry, The Global Gamble
on Financial Liberalization: Reflections on Capital Mobility, National Autonomy, and Social
Justice,Ethics & International Affairs, 13, 1 (1999): 20526.
31 See Dietsch and Rixen, Tax Competition and Global Background Justice.
72 P. Dietsch and T. Rixen
Bereitgestellt von | Universitaet Bamberg
Angemeldet | Autorenexemplar
Heruntergeladen am | 12.05.14 10:46
We call for two principles to regulate tax competition. First, we argue that
all natural and legal persons should be liable to pay tax in the state of which they
are a member. Bracketing various technical questions surrounding the definition
of membership, this membership principle is compatible with the internationally
accepted, but laxly enforced, principles of residence taxation for individuals and
taxation at source for multinational enterprises (MNEs). In effect, the member-
ship principle rules out all forms of poaching.
For individuals, this means that they cannot be resident in one country, and
shift part of their tax base to another country without paying tax on it at home. A
regulatory reform that would achieve this, which is in fact being implemented by
the European Unions saving tax directive, is automatic exchange of information
about capital holdings between countries.
For MNEs, the membership principle means that the profits from an eco-
nomic activity have to be declared for tax purposes in the same jurisdiction
where the activity takes place. A system that would achieve this is unitary
taxation with formula apportionment.
Under this policy, corporate accounts
are consolidated internationally, before each country gets assigned a share of
the profits to tax on the basis of a previously agreed formula. Typically, the
formula in question will include assets, payroll, and sales. The European Union
is currently debating the introduction of such a scheme.
Second, and more controversially, we argue that some cases of tax competi-
tion for FDI are problematic from a normative perspective, too. Our second
principle, the fiscal policy constraint, states that tax competition for FDI is
illegitimate when it both is strategically motivated and leads to a reduction in
the aggregate level of fiscal self-determination of other states.
In other words,
some cases of luring should be prohibited. To implement this principle, we
propose to install a judicial review of tax policies, which could be organised
analogously to the dispute settlement procedure of the World Trade
Organization. Any state that thinks that the tax policies of another state violate
the principle could bring the case before a dispute settlement body that would
have the competence to make a final decision.
32 See Graetz, Michael J., Foundations of International Income Taxation (New York: Foundation
Press, 2003), 40035.
33 Both elements of the fiscal policy constraint the strategic intention and the autonomy-
reducing effect are of equal importance. They have to be jointly satisfied for a case of luring to
be considered illegitimate. Providing precise criteria to operationalise the fiscal policy con-
straint lies beyond the scope of this article and will require the collaboration of international tax
lawyers. For more details on this issue, see Dietsch and Rixen, Tax Competition and Global
Background Justice.
Redistribution, Globalisation, and Multi-level Governance 73
Bereitgestellt von | Universitaet Bamberg
Angemeldet | Autorenexemplar
Heruntergeladen am | 12.05.14 10:46
To put these principles and the reforms they entail into practice, we call for
the creation of an International Tax Organization (ITO), whose task it would be
to enforce the respect of these principles, to act as a dispute settlement body in
case of violations, and to provide a forum for discussing the harmonization of
fiscal ground rules across countries. Note that none of this implies harmoniza-
tion of tax rates on capital across countries, nor does it entail that the ITO
should be given the power to levy taxes itself. On the contrary, fiscal sovereignty
stays in the hands of states, while the purpose of the ITO is to ensure that states
can exercise this sovereignty more effectively than under the tax competition
that marks the status quo.
In what sense does this proposal promote effective tax authority over
capital? First, ruling out poaching does not limit the mobility of capital, but it
imposes the condition that the capital cannot be separated for tax purposes from
the membership of its owner in a particular state. In effect, this means that the
reach of the fiscal authority of the state where the taxpayer is a member does not
stop at the border. Second, ruling out some instances of luring offers an addi-
tional layer of protection for the effective taxation of capital. Under certain
conditions, states have a legitimate complaint against the fiscal policies of
other states that have triggered realcapital flight.
Note that even when both of our principles are respected, the tax authority
of states over capital is not absolute. Under capital mobility, different demo-
cratic choices about tax structures in different states are bound to generate fiscal
externalities. However, the proposed regulation of tax competition reduces these
externalities to a minimum. Tax authority over capital is as effective as it can be
under conditions of globalisation.
3.3 The conditional subsidiarity principle for redistribution
Someone might raise the following objection to our reasoning in the two pre-
vious sections. We object to supranational tax and transfer schemes on feasi-
bility grounds, but then call for institutional reforms that also require
supranational cooperation. Is the latter not subject to the same feasibility con-
straints? In this section, we will first respond to this objection and subsequently
attempt to draw a general lesson about redistributive policies.
Our response to the objection relies on the distinction between supranational
redistribution on the one hand and other forms of supranational cooperation that do
not involve direct redistribution on the other. As we have argued in Section 2, tax and
transfer arrangements that amount to direct redistribution between states face
important feasibility constraints ceteris paribus. Whether this direct redistribution
74 P. Dietsch and T. Rixen
Bereitgestellt von | Universitaet Bamberg
Angemeldet | Autorenexemplar
Heruntergeladen am | 12.05.14 10:46
be administered by a supranational authority with an independent right to tax, or
whether it be administered nationally, there is strong resistance to such proposals
given the current motivational and political landscape.
Arguably, the feasibility constraints on certain kinds of supranational coop-
eration, as opposed to direct redistribution, are weaker. Consider the regulation
of tax competition proposed in the previous section as an example. Would it not
be in the interest of all states to have their effective fiscal sovereignty protected
by the principles we propose? The objector might remain sceptical at this stage.
After all, regulating tax competition, like any institutional reform, will produce
winners and losers. Predictably, tax havens will be adamantly opposed to our
reform proposals. So why should it be more feasible to pass this reform than to
push through a form of direct redistribution?
Granted, regulating tax competition does not represent a mutually advanta-
geous form of supranational cooperation. There will indeed be winners and losers.
However, the following considerations lead us to believe that this regulation
compares favourably with direct redistribution as far as feasibility is concerned.
First and foremost, institutional reform requires a thinner normative consensus
than redistribution at the supranational level. The latter presupposes that a suffi-
cient number of individuals have internalised the theory of justice that underpins
the required redistribution to make it politically feasible. By contrast, the former
merely requires consensus on the idea that all states should have effective control
over their tax base. Even if disagreement exists about what effective control
entails, this is not as ambitious a goal as the consensus on a theory of justice.
Second, while some tax havens would clearly lose out under the proposed
reform, for many states the question of whether they would win or lose in the
aggregate is less clear-cut. Take the United States. While the United States
figures high on lists of tax havens due to, for example, the tax treatment of
corporations in the State of Delaware, tax competition also contributes to its
sizable tax gap.
From the latter perspective, the United States clearly has an
interest to support our proposed reform.
Third, once a rudimentary coalition for reform exists, it is possible to apply
pressure on other states to come on board an institutional reform like regulating
tax competition, in the extreme through economic sanctions. In the context of
redistribution, applying such pressure seems more difficult. Even though the
moral obligation of the state that poaches tax base from others covers both
promoting institutional reform and redistribution, such states are more likely to
appeal to their sovereignty in the latter case and argue that no one has a right to
interfere with how they spend theirtax receipts.
34 See (accessed 15 January 2012).
Redistribution, Globalisation, and Multi-level Governance 75
Bereitgestellt von | Universitaet Bamberg
Angemeldet | Autorenexemplar
Heruntergeladen am | 12.05.14 10:46
For all these reasons, we think that the feasibility constraints facing institu-
tional reform are weaker compared to those facing redistribution at the suprana-
tional level.
Importantly, note that while institutional reform of the kind
proposed in Section 3 does not explicitly aim at redistribution, it nonetheless
has egalitarian side-effects. The regulation of tax competition would signifi-
cantly curtail the inegalitarian impact this phenomenon has. It would do so
both at the national level by restoring the redistributive capacity of the state and
at the global level by ensuring that developing countries get a share of the global
capital tax revenues, too.
Would such a reduction in global inequalities be
incompatible with a statist theory of global justice? No, because it would be
achieved by regulatory means rather than through direct redistribution. On the
contrary, statists should welcome the restoration of fiscal sovereignty envisaged
by our proposed institutional reform.
For redistributive policies up to a certain threshold, we have a choice
between two approaches. We can either go for direct redistribution at the
supranational level or we can promote institutional reform that will have an
equivalent redistributive effect partially by reversing some of the inegalitarian
effects of the current way the forces of globalisation are regulated and partially
by restoring the redistributive capacity of the state. On the basis of the feasibility
considerations just discussed, we should go for the institutional reform option in
such cases. The same may be true in other policy areas monetary or trade
policy for instance that we have not discussed in this article.
This brings us back to the question we started out with. Can we make any
general statements about the level of governance at which redistributive policies
should be pursued under multi-level governance? Based on the argument devel-
oped in this section, we put forward the conditional subsidiarity principle for
redistribution: When the case for supranational redistribution arises from the
alleged incapacity of states to redistribute, our first instinct should be to try and
restore this capacity through institutional reform before turning to direct supra-
national redistribution.
It is important to emphasise once again that this priority for institutional
reform is justified exclusively on grounds of feasibility. This article has only
argued for this principle in detail in the context of taxation. However, we have
35 An anonymous referee for this article stated that he was not convinced that a regulation of
international tax competition will easily win the support of many countries.We do not defend
this claim. We argue that such regulation will more easily win the support of many countries
than a scheme of direct redistribution between them.
36 See Section 3.1.
76 P. Dietsch and T. Rixen
Bereitgestellt von | Universitaet Bamberg
Angemeldet | Autorenexemplar
Heruntergeladen am | 12.05.14 10:46
reason to think that parallel arguments apply in other policy areas. Due to space
limitations, we cannot engage in this exercise here.
4 Proposals for global taxation and the
subsidiarity test
In the previous section, we have argued for a conditional principle of subsidiar-
ity under multi-level governance. Before calling for redistribution at the supra-
national level, we should use regulation to check the forces of globalisation that
make it harder to redistribute at the national level. While doing so requires
supranational regulation, it stops short of direct supranational redistribution.
While in theory producing the same distributive outcome, the regulatory
approach favoured here is subject to a weaker feasibility constraint than direct
supranational redistribution.
In this last section, our goal is to see whether some of the existing policy
proposals for global taxation pass the subsidiarity test as formulated above. Due
to space constraints, we can only discuss two reform proposals here. We have
selected the global resource dividend (GRD) as well as the financial transaction
tax (FTT), partly because they have received widespread attention, and partly
because they allow us to present some interesting distinctions when applying
the subsidiarity test. We should add an important disclaimer up front. The
discussion that follows cannot do justice to the nuances of the policy proposals
at hand. The sole objective here is to adequately present those features that are
necessary to see whether they pass the subsidiarity test or not.
4.1 A global resource dividend
The GRD is based on the idea that the global poor own an inalienable stake in
all limited natural resources.
According to Pogge as one of its principal
advocates, the status quo is morally problematic not just because the poor do
not have access to their inalienable stake, but because our economic and legal
institutions deny them this access. The uncompensated exclusion [of the poor]
from the use of natural resources
grounds a negative duty for those who
uphold these institutions and benefit from them to remedy this situation.
37 Pogge, Thomas, World Poverty and Human Rights (Cambridge: Polity Press, 2008), 202.
38 Ibid., p. 205.
Redistribution, Globalisation, and Multi-level Governance 77
Bereitgestellt von | Universitaet Bamberg
Angemeldet | Autorenexemplar
Heruntergeladen am | 12.05.14 10:46
Pogge stops short of an egalitarian argument concerning the ownership of or
benefits from natural resources, but instead makes the case for a minimal
negative duty.
Proceeds from the GRD are to be used toward ensuring that
all human beings can meet their own basic needs with dignity.
explicitly presents the modesty of his proposal as a concession to political
Moreover, he qualifies the GRD as a remedial measure that needs
to be complemented by ideas about how the injustice of the global order might
be diminished through institutional reforms that would end the need for such
remedial measures.
While Pogge delegates the technical details of the GRD to
international lawyers and economists, the potential implementations he dis-
cusses indicate in what sense we are talking about a global tax here. As an
example, he examines the likely effects of a $3 per barrel GRD on oil extrac-
Such a harmonised levy, even if it were to be administered nationally,
clearly requires states to surrender aspects of their fiscal sovereignty and
amounts to direct redistribution at the supranational level.
We contend that the GRD is unlikely to pass the subsidiarity test. To the
extent that the GRD calls for direct cross-border redistribution from the (often
illegitimate) owners of resources, the extractive industries and end consumers of
those resources
to the global poor, the GRD faces feasibility constraints that
are relatively strong compared to those faced by a series of institutional and
regulatory reforms. Our proposed regulation of tax competition is one example
for such a regulatory reform. In the context of natural resources itself, Leif
Wenars work on restoring popular resource sovereignty over natural resources
represents another.
Wenar calls for trade embargos against regimes that use
natural resources for personal enrichment. While the indirect, inequality-redu-
cing impact of his proposal may be equivalent or even more important than the
39 Some commentators see a tension between Pogges earlier cosmopolitan egalitarianism and
this minimalist position. See for instance Kelly, Erin I., and Lionel K. McPherson, Non-
Egalitarian Global Fairness,inThomas Pogge and His Critics, ed. Alison M. Jagger
(Cambridge: Polity Press, 2010), 10322.
40 Pogge, World Poverty and Human Rights, p. 203.
41 Ibid., pp. 21014.
42 Ibid., p. 30.
43 Ibid., p. 211.
44 While the tax will presumably be levied on the extractive industries, part of the burden will
be passed on to end consumers, and may also depress prices for the rights of exploitation that
resource owners can charge. The exact incidence of the tax will depend on the elasticities of
supply and demand.
45 See Wenar, Leif, Clean Trade in Natural Resources,Ethics & International Affairs, 25, 1
(2011): 2739.
78 P. Dietsch and T. Rixen
Bereitgestellt von | Universitaet Bamberg
Angemeldet | Autorenexemplar
Heruntergeladen am | 12.05.14 10:46
redistributive effect of a GRD, it does not require the kind of direct redistribution
that we know to be subject to particularly strong feasibility constraints.
In sum, whereas Pogge in the above quote characterises the relationship
between the redistribution of the GRD and regulatory reform as complementary,
our argument claims that from the perspective of political feasibility, regulatory
reform should receive priority. None of this questions the moral validity of the
GRD as a policy proposal, but it suggests that it is not the best place to start.
4.2 A financial transaction tax
In the case of an FTT, we shall see that it is more ambiguous whether or not it
passes the subsidiarity test. The idea of the FTT was first launched by the economist
James Tobin in 1972. Following the collapse in 1971 of the Bretton Woods regime of
fixed exchange rates that had governed the post-war period, Tobin asserted that the
new regime of flexible exchange rates does not satisfactorily solve all the pro-
In particular, and it is worth quoting Tobin at length here,
[u]nder either exchange rate regime the currency exchanges transmit disturbances origi-
nating in international financial markets. National economies and national governments
are not capable of adjusting to massive movements of funds across the foreign exchanges,
without real hardship and without significant sacrifice of the objectives of national eco-
nomic policy with respect to employment, output, and inflation. Likewise, speculation
on exchange rates, whether its consequences are vast shifts of official assets and debts or
large movements of exchange rates themselves, have [sic!] serious and frequently painful
real internal economic consequences.
These considerations underpin Tobins case for throwing sand in the wheelsof
international financial markets. In its original formulation, what has become
known as the Tobin tax referred to an internationally uniform tax on all spot
conversions of one currency into another, proportional to the size of the transac-
Tobin muted the possibility of a 1% tax. Contemporary versions of the
tax usually call for a lower rate, but frequently propose the extension of the tax
base to include other financial instruments such as derivatives and other hedge
The policy objectives of the FTT thus conceived were a modest
46 Tobin, James, A Proposal for International Monetary Reform,Eastern Economic Journal,4,
34 (1978): 15359, p. 158.
47 Ibid., p. 154.
48 Ibid., p. 155.
49 Wachtel, Howard, Tobin and Other Global Taxes,Review of International Political
Economy, 7, 2 (2000): 33552, p. 340.
Redistribution, Globalisation, and Multi-level Governance 79
Bereitgestellt von | Universitaet Bamberg
Angemeldet | Autorenexemplar
Heruntergeladen am | 12.05.14 10:46
national autonomy in monetary and macroeconomic policy
and, closely
related, promoting financial stability by reducing the volatility on foreign
exchange markets.
When defended as serving these two objectives, the FTT does pass the sub-
sidiarity test. If one accepts that a return to capital controls is not desirable,
the phenomenon of hot money swirling around the globe plausibly represents a
constitutive facet of globalisation. Since this phenomenon cannot be met by
unilateral national regulation, supranational action is required. By taxing capital
flows of various kinds, the FTT reduces the corrosive impact of hot money in the
international economy. It is an instrument of regulating financial markets.
However, this is not the end of the story. Many contemporary advocates of
an FTT defend the policy on different grounds. Commenting on the idea again in
1996, Tobin himself pointed out that the tax has been discovered by a non-
economics constituency, those looking for ways to finance the United Nations
and other international agencies when the demands upon them are exploding
and the member nations are stingy in supporting them.
There is now a
growing constituency of advocates of the tax for its revenue-raising potential,
not its incentive effects.
When conceived in this way, the FTT is likely
depending on how its proceeds are spent to become a tool of direct redis-
tribution at the supranational level. Let us call this version of the idea FTT
where R stands for redistribution.
For the reasons set out in Section 2 of this paper, FTT
faces stronger
political feasibility constraints than its cousin that is justified along the original
Tobinian lines. It also faces stronger feasibility constraints than other, institu-
tional reforms like for instance the instauration of minimum investment periods
for stocks and other securities or, again, the regulation of tax competition
proposed in Section 3. Therefore, FTT
fails the subsidiarity test. To conclude,
the question of whether the FTT passes the subsidiarity test depends on the
policy objective it is designed to serve.
50 Eichengreen, Barry, James Tobin, and Charles Wyplosz, Two Cases for Sand in the Wheels
of International Finance,The Economic Journal, 105, 428 (1995): 16272, p. 163.
51 See for instance Edwards, Sebastian, How Effective Are Capital Controls?NBER Working
Paper No. 7413, November 1999 (1999).
52 Tobin, James, A Currency Transactions Tax, Why and How,Open Economics Review 7
(1996): 49399, p. 493.
53 Ibid., p. 497.
54 This opens the door for political instrumentalisation of the grounds on which the FTT is
defended, but this complication is bracketed here.
80 P. Dietsch and T. Rixen
Bereitgestellt von | Universitaet Bamberg
Angemeldet | Autorenexemplar
Heruntergeladen am | 12.05.14 10:46
5 Conclusion
We have argued that we should think twice before calling for direct redistribu-
tion at the supranational level to compensate for reduced redistribution within
states. Not because these calls for justice lack normative foundation, but
because they face serious feasibility constraints. Instead, the political focus
should lie on regulatory reforms that restore the capacity of states for internal
redistribution and, as a by-product, lead to indirect redistribution between
states, too. While such reforms require supranational cooperation, they do not
require direct supranational redistribution, which makes them more feasible
politically. This priority for redistribution both through regulatory reform and
through national fiscal policy has been expressed in the conditional subsidiarity
principle for redistribution.
We have illustrated this argument with an investigation of international
taxation. Here, regulating tax competition would indeed shore up the effective
control states have over their tax base and, by eliminating the pressure to favour
regressive fiscal policies, reduce inequalities both within states and across
Finally, we should emphasise that this article does not imply that we should
abandon the political struggle for direct supranational redistribution. Most
likely, there is some level of global equality that could not be attained without
it. However, up to a certain threshold of supranational redistribution, we have a
choice between two ways of promoting it. This article argues we should favour
indirect redistribution through institutional reform over direct redistribution to
do so. The outcome will not be a world with a just distribution of income and
wealth, but one with a more just distribution than we have now.
Acknowledgments: Previous versions of this article were presented at the Centre
for Advanced Studies Justitia Amplificataat the Goethe-Universität Frankfurt
as well as at the workshop Global Tax Governance at the ECPR Joint Sessions at
the Universität Mainz. Thank you to Gillian Brock, Kim Brooks, Barbara Buckinx,
Allison Christians, Richard Eccleston, Rainer Forst, Stefan Gosepath, Mattias
Iser, Lyne Latulippe, Miriam Ronzoni, Christian Schemmel, Peter Schwarz,
Laura Seelkopf, Laurens van Apeldoorn, and Richard Woodward for their help-
ful comments. Thank you also to Gillian Brock, Tom Campbell, and Thomas
Pogge for putting together this special issue on global taxation.
Redistribution, Globalisation, and Multi-level Governance 81
Bereitgestellt von | Universitaet Bamberg
Angemeldet | Autorenexemplar
Heruntergeladen am | 12.05.14 10:46
... De mieux en mieux appréhendé dans la littérature (voir en particulier Brock, 2008 ;Dietsch, 2011 ;Dietsch et Rixen, 2012, celui-ci prend la forme de ce que l'on a pu appeler, à la suite de l'OCDE, poaching, ou « braconnage » (correspondant tant aux pratiques des paradis fiscaux, ces juridictions proposant des taux d'imposition nuls ou très faibles et garantissant le secret, qu'aux manipulations des prix de transferts entre filiales d'une même multinationale) ou du luring, terme utilisé pour décrire les pratiques de certains pays pauvres consistant à appâter les multinationales par de faibles taux d'imposition, afin de bénéficier d'investissements directs (OCDE, 1998 ;Rixen, 2011 ;Dietsch et Rixen, 2014). On parle donc de compétition fiscale lorsqu'un État met en place un ensemble de pratiques fiscales stratégiques, ayant pour but d'attirer les investissements et bases fiscales d'autres pays grâce à la faible (voire nulle) taxation de certaines matières imposables. ...
... 21, n° 2 | 2019 d'entre eux de pouvoir l'exercer : il est donc question de l'encadrer pour mieux la réaliser -le pari étant que, une fois cette régulation mise en oeuvre, chaque État, dorénavant capable de s'autodéterminer fiscalement, pourra adopter les mesures qu'il juge les mieux à même de combattre les inégalités. OEuvrer en faveur de la lutte contre les inégalités sur le plan national pourrait donc avoir pour effet (indirect) de diminuer les inégalités mondiales, sans qu'il soit nécessaire de mettre en place un impôt redistributeur dépassant les frontières (Dietsch et Rixen, 2014 universel portant sur l'imposition des revenus et des entreprises. Elle y voit une manière d'harmoniser les pratiques fiscales tout en garantissant aux États une certaine flexibilité, car, dans la construction qu'elle imagine, si certes ceux-ci ne sont pas autorisés à mettre en place des taux d'imposition plus faibles (afin d'éviter les effets pervers d'une compétition fiscale conduisant à davantage de régressivité), ils ont cependant toute latitude pour les augmenter (puis pour les réduire, jusqu'à un certain seuil donc, si les circonstances l'exigent). ...
... Sans lui, la réforme atteint ses limites -d'autant qu'elle s'appuie seulement sur des estimations des prix des ressources naturelles (Brock, 2009 : 140 et s.). Ici aussi, en outre, il semble difficile d'éviter de déléguer certains aspects de la souveraineté fiscale à une instance chargée de décider des taux, d'encadrer la levée des taxes et d'organiser la redistribution des recettes (Dietsch et Rixen, 2014). Ici aussi, enfin, pas d'imposition mondiale sans une volonté politique qui tranche avec les résistances ou la passivité actuelles ; or, il n'est pas sûr que les arguments qu'avance Pogge pour soutenir son projet parviennent à faire bouger les choses, dès lors que ces arguments sont surtout moraux, reposant non sur l'intérêt, mais sur la reconnaissance des devoirs que les pays développés ont envers les pays en développement -mais suffiront-ils ? ...
... Companies should be run by national elites, to cumulate wealth for the firms and the countries by driving economic developments. Peter Dietsch and Thomas Rixen [8] examine the appropriate purposes served by tax revenues and conclude that an unfair and radical world may emerge as a result of corporate competition. They suggest governments and authorities to intervene in order to support fair redistributions of tax revenues and indirectly alleviate the global phenomenon of tax unfairness. ...
... (1) Establishment of tax fairness organizations to harmonize the differences in taxations, definitions and practices; (2) Redefinition of international tax standards, legal frameworks and policies; (3) Appropriate oversight and information exchange to promote transparency; (4) Formation of optimal tax rates and improvement of taxation governance; (5) Legal restrictions on the authorization of political agents and innovative approaches to abuse the system; (6) Acceleration of cooperation between multilateral stakeholders and joint efforts in tax agreement issues; (7) Sharing of financial information among tax authorities in different countries; (8) Step-up of international aides to help the countries with tax problems; (9) Training of personnel to provide legal and taxation assistance; (10) Reinforcement of corporate government across the board; (11) Promotion of international politics to encourage distribution justice and social ethics; (12) Limitation of the use of tax havens and allowing international organizations to recoup lost and back taxes; (13) Enhancement of moral standards for taxpayers. ...
... Today's unfettered tax competition would exacerbate unjust economic inequalities within and across states by impacting the size of state budgets (in developing countries) as well as the tax mix (in both developed and developing countries). By focusing on the 'rules of the game' of tax competition instead of direct (re)distributive policies and outcomes on a supranational level, national redistributive capacities could be strengthened and the political prospects for reform would improve (Dietsch & Rixen, 2014). ...
Full-text available
This dissertation analyses the design of tax policies of the Organisation for Economic Co-operation and Development (OECD) between 2008 and 2018. Critiques levelled against some of the OECD’s earlier work raise the question if its recent tax policies for countering tax evasion and avoidance are fit for purpose. In answering this question, the thesis explores four policies under the prism of a typology of international tax cooperation that takes into account the divergences of interests among OECD members, and between OECD and non-members. The first policy is the tax haven blacklist (black-grey-whitelist) which has been endorsed in April 2009 during the G20 summit in London as a response to the global financial crisis. The second policy is the automatic exchange of tax information which has gradually become part of the “internationally agreed tax standard”. The third policy under review is country by country reporting (CbCR), which has been proposed by the OECD during its Base Erosion and Profit Shifting (BEPS) action plan, targeting the tax avoidance of large multinational corporations. The fourth policy concerns the requirements around beneficial ownership of legal entities under tax standards established by the Global Forum of the OECD and anti-money laundering standards established by the Financial Action Task Force (FATF). A central finding emanating from the four case study analyses is that there is a mismatch between OECD’s aspiration and self-presentation as a globally inclusive, efficient and apolitical expert think tank and the ultimate policy outputs both in terms of material policy positions and processes.
... The dominant 'internationalist' position in the philosophical literature on international taxation (perhaps surprisingly) follows the assessment of the OECD in a number of important respects (e.g. Rixen 2011, Dietsch and Rixen 2014a, 2014b, Ronzoni 2014. In Catching Capital: The Ethics of Tax Competition (2015), the most detailed and carefully developed version of this position, Peter Dietsch condemns the current situation as unjust because it limits states' fiscal self-determination, that is, their effective sovereignty in fiscal affairs. 1 Effective (or de facto) sovereignty is here conceived as the ability to achieve policy goals by means of legislation and is distinguished from formal (or de jure) sovereignty consisting in the right to write and enforce law (Dietsch 2011b(Dietsch , p. 2109). ...
Full-text available
The base erosion and profit shifting (BEPS) initiative of the Organisation for Economic Co-operation and Development (OECD) and G20 countries marks an important development in the reform of the international taxation regime. In this paper I argue that the initiative nevertheless fails to provide a coherent account of what global justice requires in the realm of fiscal policy. While the OECD’s ostensible aim to increase and protect the tax sovereignty of states is commendable, there is insufficient attention for the distribution of relative tax sovereignty. I show that current global income inequality is correlated with significant inequality of tax sovereignty, that this inequality is unjust on a plausible conception of what global justice requires, and that the BEPS initiative is unlikely to meaningfully address this injustice. I close by suggesting that an internationalist conception of justice concerned with securing the tax sovereignty of independent polities may need to prescribe the creation of glob...
O artigo começa com análises críticas de duas concepções amplamente empregadas de educação para a cidadania. Primeiro critica uma concepção exclusivamente doméstica de educação para a cidadania democrática como inadequada para preparar futuros cidadãos para as suas vidas em ambientes políticos e econômicos globalizados. Depois argumenta que a concepção da educação para a cidadania como formação da consciência global é funcionalista, enviesada pelo status quo e insuficientemente democrática. Com base nessas análises, o artigo passa a articular uma concepção de educação para a cidadania como conscientização democrática transnacional. Esta concepção sustenta que a educação para a cidadania deve contribuir para a formação da consciência democrática doméstica assim como transnacional. Pois, a menos que a educação para a cidadania contribua para a construção dessa consciência, como o artigo defende, não apenas os processos de tomada de decisão inter e transnacionais, mas também os domésticos, permanecerão democraticamente deficientes.
International tax competition undermines states’ capacity for redistributive taxation. It is thus problematic from the point of view of both cosmopolitan and internationalist theories of justice. This article examines the proposal of a fiscal policy constraint that prohibits tax policies if they are strategically motivated and harmful to effective fiscal self-determination internationally. I argue that we should opt for a more robust, preference-independent mechanism to prevent harmful tax competition instead. States should, as a matter of justice, accept global minimum tax rates on mobile tax bases.
Governments increasingly use their fiscal policy to attract mobile capital from abroad. This tax competition puts a strain on the international fiscal system by undermining the capacity of states to make autonomous fiscal choices and by exacerbating inequalities. The existing regulatory framework is not able to address these challenges. Yet, what considerations should guide our efforts for reform? This chapter argues that a first necessary step consists in understanding the principles that justify the state as the principal locus of fiscal control in the first place. Building on an account of the legitimacy of the state and its fiscal powers, the chapter shows how tax competition is in tension with the principal objectives this account assigns to the state. It then outlines a normative response to tax competition that relies on both reforming jurisdictional rules and redistribution between states.
In the global justice literature, growing attention has been given to problems particular to a globalised economy such as tax competition. Political philosophers have started to reflect on how these problems intersect with theories of global justice. This paper explores the idea according to which action-guiding principles of justice can only be formulated at such intersections. This is the starting point from which I develop a ‘non-ideal theory’ of global justice. The methodology of this theory posits that principles of justice are formulated according to the practice they are intended to regulate. Individual practices provide insights about the formulation of principles, for the non-ideal circumstances that prevent the realisation of justice are only revealed through the interpretation of each practice. With regard to the content of principles, I reject the notion that non-ideal theory is applied ideal theory. I offer instead an overview of the main features of a conception of justice for a non-ideal world based on the ideas of compliance, fact-sensitivity, feasibility and path-dependence. The contribution of this paper is twofold: to provide the conceptual framework for an action-guiding non-ideal theory of global justice and to show why this theory is well-suited to address problems of a globalised economy, such as tax competition.
Full-text available
Versions of this article have been presented at the Canadian Political Science Association (Montréal, 2010), the ECPR General Conference (Reykjavik, 2011), the Social Science Research Center Berlin (WZB) as well as at the Centre de Recherche en Éthique de l'Université de Montréal (CREUM). For comments on previous drafts of this article we thank participants at these events and, in particular, Kim Brooks, Ryoa Chung, Matthias Ecker-Ehrhardt, Tim Gemkow, Anja Görnitz, Monika Heupel, Dominic Martin, Mihaela Mihai, Jean-Pierre Vidal, Lora Viola, Daniel Weinstock, David Wiens, Jurgen de Wispelaere, and Michael Zürn. Special thanks are due to Barbara Buckinx, Miriam Ronzoni, and Christian Schemmel for detailed written comments and to Georg Simmerl for his research assistance. We acknowledge financial support from the Humboldt Foundation, the German Academic Exchange Service (DAAD), and the Social Sciences and Humanities Research Council of Canada (SSHRC).
Full-text available
Corporate taxes exert a variety of effects on business behaviour. A wealth of empirical evidence assesses the magnitude of these behavioural margins of taxation. This article offers an up-to-date review and aims to provide common ground by computing for each distortion the semi-elasticity of the corporate tax base. We pay particular attention to international investment where it is not a priori clear whether marginal investment decisions or discrete locations are more important. Using an extension of the meta analysis of De Mooij and Ederveen (2003), we explore the extent to which existing studies reveal differences in effect size between the intensive and extensive margins of international investment. Copyright 2008, Oxford University Press.
The “resource curse” can strike countries that derive a large portion of their national income from exporting high-value natural resources, such as oil, gas, metals, and gems. Resource-exporting countries are subject to four overlapping curses: they are more prone to authoritarianism, they tend to suffer more corruption, they are at a higher risk for civil wars, and they exhibit greater economic instability.
The author discusses the issues impacting the development of international tax policy. He states that the proper question in forming international tax policy should be, "what policy is in the United States' national interest?" However, advancing the competitive position of U.S. multinationals may or may not be the right answer, depending on the issue and the circumstances. The author looks at the taxation of business income, and the relative merits of our credit system versus an exemption system, then explores the taxation of portfolio income. He notes that the U.S. international income tax system is built on irrelevant concepts, discussing specifically, corporate residence and source classifications. And, he finds that policymakers in the U.S. are insufficiently alert to the impact of international organizations such as the World Trade Organization and the European Court of Justice. Finally, he observes that the U.S. has the wrong mix of taxes, relying to heavily on income taxes and not nearly enough on a consumption tax.
The crises and defections that afflicted the European Monetary System in 1992–93 are convincing recent demonstrations that adjustable pegs are not viable. At the same time, experience since 1971 has not fulfilled the more extreme claims of the advocates of floating rates. Transactions taxes are an innocuous way to throw some sand in the wheels of super-efficient financial markets and create room for differences in domestic interest rates, thus enabling national monetary policies to respond to domestic macroeconomic needs. Copyright Kluwer Academic Publishers 1996
A number of authors have recently argued that, in order to avoid financial instability, emerging countries should rely on capital controls. Two type of controls have been considered: controls on capital outflows, and controls on capital inflows. In this paper I review the historical evidence on the effectiveness of these two type of controls. I argue that controls on outflows have been ineffective. They are circumvented and breed corruption. I also analyze Chile's recent experience with controls on inflows, and I argue that their effectiveness has been exaggerated.
The incompatibility of pegged exchange rates, international capital mobility and national monetary autonomy is a basic postulate of open economy macroeconomies. In the present environment of high capital mobility and political uncertainty, even the possibility that governments may utilize their policy autonomy can defeat efforts to peg the exchange rate. This leaves two possibilities. One is to fix the exchange rate irrevocably through monetary unification. The other is to live with floating rates. Either way, a case can be made for "throwing sand in the wheels" of international finance. Where monetary unification is not an option, this is a may to make distinct national currencies tolerable and international money and capital markets compatible with modest national autonomy in monetary and macroeconomic policy. For. EU counties striving to create a monetary union, it is the only politically and economically feasible way of completing the transition to Stage III of the Maastricht process. (This abstract was borrowed from another version of this item.)
Tax Competition and Global Background Justice” Article first published online The Political Economy of International Tax Governance
  • Dietsch
  • Thomas Peter
  • Rixen
Death and Taxes: The True Toll of Tax Dodging
  • Aid