Tax Competition and Global Background Justice

Abstract

Competition for mobile tax bases undermines the fiscal self-determination of states and exacerbates inequalities of income and wealth both within countries and globally. The paper provides a normative evaluation of international tax competition, and puts forward two principles of international taxation designed to both protect and circumscribe the fiscal self-determination of states. First, a membership principle, which holds that deriving the benefits of membership in any given country grounds an obligation to pay one’s taxes there. Second, a constraint on fiscal policy, ruling out fiscal arrangements that can be shown both to be based on strategic intent and to have a collectively negative outcome. We call for the establishment of an International Tax Organization (ITO) to implement these principles of global background justice in taxation.