Economic Analysis of Tax Law from a Sustainable Perspective

Abstract

Since sustainable taxation requires certain tax designs, the question arises if tax rules are adequate from a sustainability perspective. Answering this question presupposes a framework of economic analysis of law. The mainstream approach of economic analysis of law deduces social order rules from the general value of neoclassical efficiency. Yet, efficiency is not an adequate social order value for sustainable tax law, and neoclassical theory is not an adequate underlying theory. Thus, the present Article outlines a framework that discusses how to design sustainable tax rules. It emphasizes that this framework needs methodological rules, empirically confirmed theories like the political-cultural market approach, and the reference to ethical concepts of relevant social values (in contrast to dogmatizing efficiency). This Article argues that Sustainable Development Goals (SDGs) in general are adequate social order values for an economic analysis of tax law. On this basis, the Article outlines how to develop a sustainable tax law. It shows that a decision-neutral tax law is neither realizable nor reasonable. Furthermore, it argues that the substantiation of achieving more equality (SDG 10), e.g., the interpretation of ability to pay, the discussion of companies’ fair share
of tax, or the discussion of whether a one-book system is adequate requires detailed theoretical and ethical analysis. The same holds for answering the question whether environmental taxes are an adequate means to motivating actors to behave in an eco-friendly way (SDGs 7, 11, 12). Even this Article’s short analysis shows that tax rules that are in line with sustainability will differ considerably from tax rules that comply with the mainstream approach of economic analysis of law.