Taxation in an Integrating World

Taxation in an Integrating World

Taxation in an Integrating World

Taxation in an Integrating World


"In this book, part of the Brookings Integrating National Economies series, Vito Tanzi assesses the need for, and obstacles to, cooperation among countries. He addresses key questions about the effects of internationalization on current and developing tax systems. Tanzi encourages policymakers and tax experts to think globally as they establish new policies. He calls for greater tax harmonization and coordination across national borders and explores the viability of an international institution that would establish and enforce rules for taxation. This institution, similar to the General Agreement on Tariffs and Trade for trade issues and the International Monetary Fund for general macroeconomic issues, would provide much needed surveillance over the developments in tax systems. Tanzi argues that the creation of such an institution would encourage countries to follow common policies and would support the efforts of international economic integration." Title Summary field provided by Blackwell North America, Inc. All Rights Reserved


Modern tax systems were developed when countries' economies were relatively closed. At that time most of the incomes received by individuals or enterprises were domestic, and individuals and enterprises operated largely within one jurisdiction. Political and economic frontiers coincided fairly closely. The principles that came to guide tax relationships reflected these conditions.

The increasing globalization of economic activities and the growing integration of the world's economies have changed the economic environment, creating conflict between traditional principles and policies and current developments. Individuals and companies operating internationally pay income abroad and receive income from abroad. Capital and, to some extent, highly skilled labor have become more sensitive to differences in effective tax rates and react to these differences.

The implications of these changes for tax systems are enormous, and not fully understood. In this book Vito Tanzi, who is director of the Fiscal Affairs Department of the International Monetary Fund, attempts to address some of the key questions that arise in this changing environment. Drawing from his direct experience, he pays special attention to administrative and practical considerations that may limit the solutions that on purely theoretical grounds may appear optimal or, at least, desirable.

In writing this book the author received help from many individuals. He is particularly grateful to Henry Aaron for his comments, criticism, and encouragement, and to Joel Slemrod for thoughtful and useful comments on an early draft of this paper. Useful comments . . .

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