ABSTRACT
Tax competition, that is, the practice of designing the tax code of a jurisdiction in order to attract capital from elsewhere, should be regulated. Against the backdrop of a taxonomy of different kinds of tax competition, the chapter makes this case on three grounds. First, tax competition is undemocratic, because it undermines the capacity of political communities to control the fiscal decisions that affect them. Second, tax competition tends to exacerbate unjust inequalities in income and wealth both domestically and globally. Third, tax competition turns out to be inefficient in the sense that the fiscal loopholes characteristic of it lead to optimal tax theory recommending locally efficient tax rates that are too low compared to the globally efficient solution of closing the loopholes.
