Tax competition

When two different jurisdictions try to attract businesses and individuals by reducing their tax rates. In theory, this can prevent governments from making excessive tax demands on their populations. But this depends on how mobile taxpayers are. Under the Bretton Woods system, capital controls made it hard to move money between countries; tax rates on companies and rich individuals were generally higher. Now, some critics argue, a combination of free capital movement and tax havens means that the corporate sector and the wealthy do not pay enough tax.