University of Piraeus. International Strategic Management Association
Abstract
In the past, governments had more freedom in setting their taxes as the
barriers to free movement of capital and people were high. The gradual process
of globalization is lowering these barriers and results in rising capital flows and
greater manpower mobility. Tax competition exists when governments are
encouraged to lower fiscal burdens to either encourage the inflow of productive
resources or discourage the exodus of those resources. With tax competition in
the era of globalization politicians have to keep tax rates “reasonable” to
dissuade workers and investors from moving to a lower tax environment. Most
countries started to reform their tax policies to improve their competitiveness.
However, the tax burden is just one part of a complex formula describing national
competitiveness. The other criteria like total manpower cost, labor market
flexibility, education levels, political stability, legal system stability and efficiency
are also important.peer-reviewe