Recent developments show that the contemporary tax-landscape is going through a legitimacy crisis in virtually all Western democracies and even beyond.

This open crisis seems to be triggered during the last decade by a few important macro-economic disturbances. The US real estate crisis in 2007 disturbed the financial sector, which in its turn led at the beginning of this decade to a fiscal crisis within many European countries (such as Greece, Spain, Portugal) and consequently – within the EU – to the so-called Euro crisis. In reaction national authorities were forced worldwide into greater fiscal orthodoxy. As a result they planned important cuts in government spending and focused on a more stringent monitoring of compliance by taxpayers. In this context the Stability and Growth Pact (SGP), as a set of rules designed to ensure that countries in the European Union pursue sound public finances and coordinate their fiscal policies, is exemplary.

At the same time revelations in the public media (such as Swissleaks, Luxleaks and the Panama papers) revealed that some multinational companies, still succeed in minimising the fiscal pressure on their globally acquired profits by pitting the fiscal regimes of countries in which they operate, against each other. The multiplicity of fiscal regimes and the inconsistencies between these regimes still offer numerous possibilities for fiscal optimisation. Also high net worth individuals are able to circumvent taxes on their income and/or assets through a variety of national and international tax schemes. There is even a high-tech industry that seeks to guide and assist clients with their tax dealings in order to have them pay as little tax as possible.

On the other hand, many countries (often smaller countries) – even in the European Union – use their tax sovereignty as a lever to compete with each other to attracting businesses and high net worth individuals with very attractive fiscal conditions by means of various techniques such as tax-friendly regimes (tax shelters), tax exemptions, tariffreductions and rulings. In the European Union the Commission tries to tackle these national tax regimes within the framework of the state aid rules and by recommending some policy rules against harmful tax competition.