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I don't think the parent poster suggested there be no regulation or taxes.

Clearly there are more to countries than tax rates and regulations. However, the parent poster relates an anecdote where one country with less restrictive regulation is chosen over another, all other things being equal.

So to answer your question, if a country has a superior market or the right labor pool, then it will succeed despite higher tax rates or restrictive regulations, to a point.

Despite a zero corporate tax rate and few regulations, Somalia still hasn't posed a threat to Europe and the U.S. as a corporate headquarters. The "race to the bottom" is bounded by other factors besides tax rates and regulation. Rule of law, enforceability of contracts, access to a skilled labor pool, access to markets, etc. are more important.

Interestingly enough, these factors are a correlated to sufficient government revenue and regulation to uphold contracts and satisfy labor.