Tax competition and finance equilibrium

In light of the unabated tax competition in the EU, political demands are increasingly voiced that the allocation of structural funds be tied to a minimum taxation. Their strategic nature notwithstanding, these demands can be justified within the framework of the theory of fiscal federalism. They are in accord with the logic of fiscal equalisation. A corresponding European fiscal equalisation would lead to such serious problems, however, that there would be no alternative to a reduction of statutory tax rates in Germany. In any case the structural funds do not lend themselves as means to bring about pressure since, because of their co-financing by the EU member states, they tend to have the effect of raising tax rates.