Global Tax Revolution: The Rise of Tax Competition and the Battle to Defend It.

• Author: Holcombe, Randall G.
• Position: Brief article - Book review

Global Tax Revolution: The Rise of Tax Competition and the Battle to Defend It

By Chris Edwards and Daniel J. Mitchell

Washington, D.C.: Cato Institute, 2008.

Pp. 250. $21.95 cloth.

The first sentence of Global Tax Revolution, "A fear is haunting big governments around the world--the fear of rising tax competition," is, I assume, a take-off on the first sentence of The Communist Manifesto. Just as when Marx and Engels warned that "[a] spectre is haunting Europe--the spectre of Communism," Chris Edwards and Daniel Mitchell intend their book as a warning: governments that resist tax competition by keeping their tax rates high will be overtaken by nations whose governments are lowering the rates to make their countries more competitive.

The book consists of ten chapters, each making a simple, straightforward point supported by copious data and case studies. Chapter 1 provides an overview, giving examples of tax competition and citing resistance by governments that want to preserve higher rates. Chapter 2 focuses in global capital flows, offering much empirical evidence on the growth in foreign investment worldwide and on the importance of national tax structures in directing those capital flows. More countries are becoming good places to do business, and international corporations invest all over the world. In response to capital that is increasingly mobile across national borders, countries have changed policies to make themselves more business-friendly, cutting taxes substantially.

Chapter 3 describes a worldwide tax-cut revolution as countries have reduced the rates of their income and capital-gains taxes. Twelve Organization of Economic Cooperation and Development (OECD) countries have capital-gains rates of zero. The authors document cuts in tax rates on corporate income, dividends, and wealth throughout the world, providing many illustrative graphs and charts. Chapter 4, titled "Flat Tax Club," describes how nations are adopting a flat-rate income tax. The authors note, "By 2008, 25 jurisdictions had adopted single-rate individual income taxes," and argue that these countries have prospered because they have done so.

In chapter 5, "Mobile Brains and Mobile Wealth," Edwards and Mitchell describe how individuals, corporations, and capital are willing to move across borders in pursuit of lower tax burdens, giving examples of specific individuals and corporations who have moved to lower-taxing jurisdictions. The chapter is more anecdotal...