Competing for Capital: Tax Competition and Globalization

An important facet of globalization is national governments' vigorous competition for capital and jobs via economic policy, including tax policy. Healthy tax competition underpins globalization, driving cross- border investment that fuels economic development through technological advancements, infrastructure growth, and industry diversification in emerging and developed markets. These benefits materialize as improvements to wages, working standards, and environmental protections, as Johan Norberg explains in another essay in this series. On these margins of social and environmental welfare, he concludes, "the race to the bottom is a myth." The same is true for tax policy: Contrary to widespread fears that globalization would spur governments to slash corporate tax rates at the expense of social welfare and global equity, this race has instead bolstered international investment and increased tax revenues.