Rather than a “race to the bottom”, with only tax rates reduced, we begin to see tax reforms that make a country more “competitive” and more attractive for investment and human capital. On the expenditure side, the influence of globalisation appears to be more limited. We should expect a tendency towards smaller but more efficient budgets, with “higher-quality” public spending.
This implies, for example, more emphasis on “tomorrow” – i.e. investment and education (also for older workers) – and less on “yesterday” – e.g. less money spent on unemployment benefit for unskilled workers or on large and inefficient public administrations. On this issue, the debate has only started in the European Council of Ministers of the EU Member States (ECOFIN).