The Elgar Guide to Tax Systems

The Elgar Guide to Tax Systems

Elgar original reference

Edited by Emilio Albi and Jorge Martinez-Vazquez

Tax systems have changed considerably in the past three decades. These fundamental changes have been the result of economic globalization, new political stances, and also of developments in public finance thought. The chapters in this volume offer a critical review of those changes from the perspectives of tax theory, policy and tax administration practice, and the political economy of taxation. The authors also consider what sort of reforms are worth undertaking in tax policy design, tax administration and enforcement, and the assignment of sub-national taxes.

Chapter 1: Tax Systems in the OECD: Recent Evolution, Competition, and Convergence

Vito Tanzi

Subjects: economics and finance, public finance, law - academic, tax law and fiscal policy, politics and public policy, public policy


* Vito Tanzi 1 INTRODUCTION The popular view is that taxes are imposed to finance the activities of governments and public sectors. They are the prices paid for the (generally free) services that citizens receive from their governments. This view remains popular and finds its way into the writings of economists and tax experts. However, with the passing of time it has become a little detached from reality for at least two reasons. First, governments finance at least part of their activities with non-tax revenue such as public debt, sale of assets, earnings from publiclyowned natural resources, incomes from publicly-owned monopolies, fees, fines, and so on. Second, tax policies have increasingly been used to promote non-revenue objectives. These may be to stimulate or, at times, slow down some activities, enterprises, regions, social behavior, and so on. Revenue needs, to finance public sectors activities or government objectives, change over time, for the same countries, and, at a given time, are likely to be different across countries. The broader the economic role of the state, the more revenue a country’s government will need at a given time. Much of this revenue will come from taxes. Thus, both the share of total tax revenue into gross domestic product – T/GDP – and the share of public spending – G/GDP – will have to change. At the same time, reflecting the countries’ preferences as well as their economic and other characteristics, the structure of their tax systems will also change. In this chapter the focus of attention will be...

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