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Catching CapitalThe Ethics of Tax Competition$
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Peter Dietsch

Print publication date: 2015

Print ISBN-13: 9780190251512

Published to Oxford Scholarship Online: August 2015

DOI: 10.1093/acprof:oso/9780190251512.001.0001

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Efficiency of what?—Assessing efficiency arguments in the context of tax competition

Efficiency of what?—Assessing efficiency arguments in the context of tax competition

Chapter:
(p.127) Chapter 3 Efficiency of what?—Assessing efficiency arguments in the context of tax competition
Source:
Catching Capital
Author(s):

Peter Dietsch

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780190251512.003.0004

The concept of efficiency is used in different ways in economics. First, the practical relevance of models that conclude that tax competition is either Pareto optimal or not is limited, because we do not live in the idealized circumstances of the Pareto frontier. Second, the more relevant criterion of Pareto improvement is silent on the prospect of regulating tax competition because, as previous chapters have shown, the latter has redistributive effects. Third, efficiency as an instrumental value to arbitrate trade-offs between two or more policy goals—a role it plays in optimal tax theory, for example—can in fact be used to show that regulating tax competition is a requirement of efficiency rather than an obstacle to it.

Keywords:   taxation and efficiency, deadweight loss, economic models of tax competition, Pareto optimality, optimal tax theory, progressivity under tax competition

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