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Religion and Political Theory: Secularism, Accommodation and The New Challenges of Religious Diversity, Edited by Jonathan Seglow and Andrew Shorten

Freedom of Choice and the International Allocation of Taxing Rights with Special Emphasis to the European Debt Crisis

Peter Schwarz
Eidgenössische steuerverwaltung
Peter Schwarz
Eidgenössische steuerverwaltung

Whereas loyalty is never an option for a footloose utility-maximizing person, voice and exit could serve as close substitutes. In the aftermath of the financial crisis people`s opportunity to exert their voice has dramatically declined in Euro zone member countries: Citizens living in debtor countries face a coalition of parties who do not differ in their will to consolidate, whe-reas citizens in wealthier member states have no opportunity to express their voice against financial help towards Southern European member states. Due to this TINA-principle the only reasonable option to bring taxation closer to the benefit principle is to migrate into those countries who offer an attractive package in terms of public goods / taxation. However, many governments restrict the exit option of individuals / companies into foreign territories by ap-plying several avoidance measures. The present paper discusses how international income should be taxed based on the principles of horizontal equity, prohibition of arbitrariness, con-stitutional conservatism and tax system stability. It concludes that most, though not all avoid-ance measures of high-tax states massively violate freedom of choice. A violation could only be justified from a normative point of view if foreign low-tax countries offer measures which foster discriminatory taxation. Thus, the space for international tax cooperation should be mainly limited towards the abolishment of discriminatory measures. Tax avoidance / evasion share an ambivalent relationship with respect to the above-stated principles: On the one hand they may foster the erosion of these principles, on the other hand they serve as a final option in search for a “fiscal asylum”.

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