Taxcompetitionisanoldconcept,butpoliticalandacademicinterestinitisfairlynew.Foralongtime,taxesweresimplytoolowandcross-nationaltaxdifferentialstoosmallto
triggersignificantcross-bordermovementsoftaxpayersandbases.Inthetwentiethcentury,taxburdensincreaseddramaticallybutsodidrestrictionstocross-bordermobility:high
tariffs,strictcapitalcontrols,limitedcurrencyconvertibilityandtoughvisaandimmigration
lawsgreatlyreducedthescopeforinternationaltaxavoidanceandevasion.Thischangedwith
theonsetofdeepeconomicintegrationinthe1980s.Mobilitybarrierswerebeingeroded.Tradeliberalization,capitaldecontrolandcurrency
convertibilityatthegloballevel,regionalintegrationschemessuchastheEU’sSingleMarket
orNAFTA,aswellasnewcommunicationsandtransporttechnologiesgreatlyreducedthe
transactioncostsofmovinggoods,services,capitalandjobsacrossnationalborders.Many
observersfeared(Sinn,1990;Scharpf,1991;Steinmo,1994;Tanzi,1995;Rodrik,1997),whileothershoped(EdwardsandKeen,1996),thatthisdevelopmentwouldpullthefiscalrug
outfromunderthewelfarestate.Exit,theyargued,wouldbecomeaviablestrategyanda
credibleimplicitthreatfortaxpayers,forcingnationaltaxauthoritiestocompetefor,rather
thantoimposeon,taxableassetsandactivities.Internationaltaxcompetitionseemedto
finallycomeintoitsownandstarteditsascentasatopicforpoliticalandacademicdebate