Globalization and Harmful Tax Competition

This study focuses on the difficulties in taxing capital, which can easily overcome time and space limitations with the globalization process. It is observed that especially developing countries resort to low tax rates and various tax privileges in order to attract foreign capital to their countries due to the economic conditions they are in. The continuation of this trend among countries, in other words, tax competition among countries erodes tax bases, disrupts the integrity of tax structures and, in particular, weakens tax justice. This harmful tax competition leads to a shift in the tax burden from highly mobile capital to relatively less mobile labor. This study analyzes the changes in corporate tax rates of OECD countries and Balkan countries during the globalization process. In order to solve the global problem of harmful tax competition and other global tax problems, states should work together. Harmonization of tax systems, comprehensive cooperation between tax administrations and transparent exchange of information are crucial to minimize the erosion of tax bases.