MARCO GREGGI, University of Ferrara - Department of law, Monash University - Department of Business Law & Taxation
Email: universita.ferrara@gmail.com

Taxation has always been a social and legal phenomenon closely intertwined with democracy. In human history there are countless cases in which economic integrations of States or territories failed because of a taxation system not consistent with the fundamental issues of democracy. This paper tries to focus on the (possible) taxing power of the European union, pinpointing at the same time the difficulties that must be overtaken in this respect.

Taxation, in the modern sense of the word was born with the Roman empire, at least on the continent and therefore was closely related with he consensus at the very beginning, and the with the power of the Emperor.

In the case of the European union, it is evident that no consensus is possible, as far as the European Parliament has no power in this respect, thus a possible EU Tax should be founded on a different ground. Taxation would occur without a democratic consensus traditionally expressed for it. In the author's opinion, consensus and democracy are fundamental conditions for taxes to be applied, and in this respect while a European Tax is necessary for the Union, on the other side the proper political conditions for it must be created.

DIANE L. FAHEY, New York Law School
Email: dfahey@nyls.edu

The total number of victims who are held in captivity to perform forced labor at any one time is estimated to be as high as twenty-seven million. That would be equivalent to every man, woman, and child in the states of New Hampshire, Vermont, Massachusetts, and New York being held in captivity and forced twelve to fourteen hours each day to labor in sweatshops, or toil as agricultural workers, or service sexually many customers every day with no hope that it will ever end except by death. They would live in crowded, dirty hovels, receive little food and no medical care, and live under the constant threat of beatings, rape, and other violence. Every year, new victims will be added to their numbers. This is human trafficking.

The twenty-seven million victims include those who are trafficked within their own country and those who are trafficked across international borders. Each year, as many as one to four million new victims are trafficked across international borders. Despite strong denunciation by the U.N., the United States, and the European Union, this modern day slavery flourishes.

Of all the factors that lead to human trafficking, government corruption is the most significant. This article recommends an economic incentive that would recruit as allies in this war the wealthy residents of countries where the abuse is most rampant, and where the governments themselves, or government officials are complicit in trafficking. The economic incentive that would be used is taxation.

The wealthy invest the bulk of their money in the world's major economies and the governments of the major economies should re-impose the withholding tax on interest income from investments. These governments can then agree to reduce the withholding tax rates on residents of complicit countries if trafficking is reduced. In addition, the governments of the major economies can promise to refund to the complicit governments a certain amount of the interest income withheld after the complicit governments achieve certain benchmarks. This economic solution applies pressure on those who are in positions of power to achieve change, and at the same time does not hurt those who are the most vulnerable to trafficking - the poor.

LARS P. FELD, Ruprecht-Karls-University Heidelberg, CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Email: lars.feld@awi.uni-heidelberg.de
JOST HECKEMEYER, Centre for European Economic Research (ZEW)
Email: heckemeyer@zew.de

Despite the continuing political interest in the usefulness of tax competition and tax coordination as well as the wealth of theoretical analyses, it still remains open whether or when tax competition is harmful. Moreover, the influence of tax differentials on multinationals' decisions is still insufficiently analyzed. Thus, economists have increasingly resorted to empirical analysis in order to gain insights on the elasticity of FDI with respect to company taxation. As a result, the empirical literature on taxation and international capital flows has grown to a similar abundance during the last 25 years as the respective theoretical literature. Its heterogeneity leads to a rising need for concise reviews on the existing empirical evidence. In this paper we extend former meta-analyses on FDI and taxation in three ways. First, we add the most recent publications unconsidered in meta-analyses up-to-date. Second, we apply a different methodology by using a broad set of meta-regression estimators and explicitly discuss which one is most suitable for application to our meta-data. Third, we address some important issues in research on FDI and taxation to the clarification of which meta-analysis can make valuable contributions. These issues are mainly: The influence of variables which might moderate effects of tax differentials (e.g. public spending), the implications of using aggregate FDI data as opposed to firm-level information on measured tax effects, the implications of bilateral effective tax rates, and the possible presence of publication bias in primary research.

WEI CUI, China University of Political Science and Law
Email: wei.cui@post.harvard.edu

China's recent VAT reform also triggered changes to the business tax (BT), which is a VAT-substitute applied to services and certain other sectors. The most important among these changes is that foreign providers of service to Chinese customers are now subject to the BT even if the service is performed abroad. If the BT is thought of as a consumption-type tax, it's natural to interpret this change as a switch from origin- to destination-based taxation. This report summarizes the mixed practice of the destination and origin principles under the current Chinese VAT/BT regimes, evaluates the economic effect of the partial switch to the destination principle in taxing cross-border services, and describes likely future developments in the direction of destination-based taxation.

WEI CUI, China University of Political Science and Law
Email: wei.cui@post.harvard.edu

To implement the foreign tax credit (FTC) provisions under the Enterprise Income Tax Law, Chinese tax policymakers are currently drafting detailed regulations on the computation of foreign source income and FTC limitations. These rules are of special interest given the dramatic increase in recent years in overseas acquisitions by Chinese firms. After identifying some of the most important policy issues facing the design of FTC rules in China, the article focuses on how limits may be imposed on aggregating profits and losses across foreign and domestic operations. It is argued that (i) Chinese tax authorities have so far adopted rules that substantially deviate from what principles of equity and economic efficiency recommend, and (ii) the government's sacrifice of neutrality in the pursuit of revenue may nonetheless be understandable, in light of some current features of Chinese foreign acquisitions.

HARTMUT EGGER, University of Zurich - Socioeconomic Institute (SOI), CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Email: egger@wwi.unizh.ch
UDO KREICKEMEIER, University of Nottingham - School of Economics, CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Email: udo.kreickemeier@nottingham.ac.uk

This paper analyses the effects of redistribution in a model of international trade with heterogeneous firms in which a fair-wage effort mechanism leads to firm-specific wage payments and involuntary unemployment. The redistribution scheme is financed by profit taxes and gives the same absolute lump-sum transfer to all workers. In this setting a higher tax rate reduces aggregate labour income and makes the income distribution more equal, with unemployment remaining unaffected. International trade increases aggregate income, income inequality and the unemployment rate, ceteris paribus. If, however, trade is accompanied by a suitably chosen increase in the profit tax rate, it is possible to achieve higher aggregate income and a more equal income distribution than in autarky, provided that the share of exporters is sufficiently high.