The Discrepancy between 'Ideal' and 'Real World' International Tax Rules - What Drives Politicians When Making the Rules?

24 Pages Posted: 12 Feb 2013

See all articles by Julia Braun

Julia Braun

Vienna University of Economics and Business - Department of Economics; ZEW – Leibniz Centre for European Economic Research

Date Written: October 25, 2012

Abstract

The current international tax system diverges greatly from a theoretically 'optimal' tax system. One reason for this discrepancy may be that politicians strive for other objectives rather than making tax rules that comply with the theoretical concepts of optimal taxation. In this article, I overview the approaches used in the economic and legal literature to explain the motivations of the people making international tax policy and contrast them with observations from the 'real world'. This article illustrates that the making of international tax policy is affected by many different factors: domestic pressure groups and the structure of the international tax system, along with self-interested politicians and bureaucrats. Considering the complexity of the conditions under which international tax policy is made, it is not astonishing that international tax law deviates from the principles characterizing ideal taxation.

Keywords: international tax policy, optimal taxation, global efficiency, national welfare, public choice theory, game theory

JEL Classification: F50, F53, H21, H25, H87, K34

Suggested Citation

Braun, Julia, The Discrepancy between 'Ideal' and 'Real World' International Tax Rules - What Drives Politicians When Making the Rules? (October 25, 2012). WU International Taxation Research Paper Series No. 2012-10, Available at SSRN: https://ssrn.com/abstract=2171782 or http://dx.doi.org/10.2139/ssrn.2171782

Julia Braun (Contact Author)

Vienna University of Economics and Business - Department of Economics ( email )

Welthandelsplatz 1
A-1020 Wien
Austria

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

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