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The outcomes of the globalization and tax competition on the state's economy, are shown. The fiscal prospects of the welfare state and the constraints due to tax competition are discussed.

Taxpayers can move to locations where taxes are lower if one national government imposes high taxes. This can give rise to tax competition,which appears to be an intractable problem in the European Union (EU). Tax competition means that tax revenue drops in the world as a whole, but individual states can benefit. There are similar dilemmas in other areas of regulatory competition in Europe. Neoliberal economics tends to focus on relative gain rather than absolute loss.