Taxation, Financial Innovation, and Integrated Financial Markets: Some Implications for Tax Coordination in the European Union

TL;DRAbstract

The past decade has witnessed major changes in the volume, composition, and direction of international capital flows, as well as a wave of deregulation and financial innovation. For the most part, public-finance economists have concentrated their attention on the opportunities this new climate has created for tax evasion and tax competition (Mintz, 1992; Gordon 1995; Tanzi, 1995). By contrast, tax practitioners and financial-market participants have tended to stress the inconsistencies of existing tax systems, the tax impediments to the smooth working of markets, and the inefficiencies of the established anti-tax-avoidance mechanisms (Scholes and Wolf son, 1992; Plambeck, Rosenbloom, and Ring, 1996). Not surprisingly, these different perspectives suggest vastly different policy recommendations.

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