Harmful Tax Competition

Harmful tax competition occurs when countries reduce tax rates to attract businesses and wealthy individuals, often leading to a "race to the bottom." This practice can undermine global tax revenues, as companies may shift profits to low-tax jurisdictions, making it harder for governments to fund public services. It can also create an uneven playing field, disadvantaging businesses in countries with higher tax rates. Ultimately, harmful tax competition can erode the tax base of many nations, leading to financial challenges and increased inequality.