Taxation in times of austerity: a question of political economy

  • Even though fiscal sovereignty still counts as a fundamental principle of government, global and regional economic integration as well as increasing levels of sovereign debt severely limit governments’ tax policy choices. In particular the redistributive function of taxation has suffered in the pursuit of economic competitiveness. As inequality rises and attention is directed again at taxation as a means for redistribution, international cooperation appears as an avenue to enable redistribution through taxation. Yet, one of the predominant international institutions dealing with tax matters – the OECD – with its focus on economic growth and competitiveness and resulting tax policy advice prevents rather than promotes national and international debates on taxation as a question of social justice. The paper argues that questions of taxation need to be perceived as questions of social justice and thus as questions of politics, and not merely of economics. Only if taxation is not considered a mere economic instrument can a ‘political economy’ be maintained. The paper addresses the three objectives of taxation – revenue generation, redistribution and regulation -- and how they are affected as governments aim for fiscal consolidation to conclude that governments’ power to freely pursue and calibrate these objectives has come to appear rather as a myth than the core of sovereignty. It then demonstrates how the OECD’s tax policy advice and cooperation in tax matters react to the constraints on governmental taxation powers; how they aim at economic growth and competitiveness to the detriment of (other) ideas of social justice. The paper concludes with a call for (re)integrating social and global justice concerns into debates on taxation.
Author:Isabel Feichtner
Parent Title (German):Arbeitspapier / Fachbereich Rechtswissenschaft, Goethe-Universität Frankfurt am Main = Research paper / Faculty of Law, Goethe-Universität Frankfurt am Main, Nr. 2014,4
Series (Serial Number):Arbeitspapiere / Fachbereich Rechtswissenschaft, Goethe-Universität = Research paper / Faculty of Law, Goethe University (2014, 4)
Publisher:Goethe-Univ., Fachbereich Rechtswiss.
Place of publication:Frankfurt am Main
Document Type:Working Paper
Date of Publication (online):2014/02/25
Date of first Publication:2014/02/25
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2014/02/25
Page Number:27
First Page:1
Last Page:27
Forthcoming in: Thomas Cottier/Rosa Lastra/Christian Tietje (eds), The Rule of Law in Monetary Affairs, Cambridge University Press, 2014
Institutes:Rechtswissenschaft / Rechtswissenschaft
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Dewey Decimal Classification:3 Sozialwissenschaften / 34 Recht / 340 Recht
Licence (German):License LogoDeutsches Urheberrecht