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In 1995, Paul Peterson, a professor of government at Harvard University, concluded that the greatest price of the United States (U.S.) federalist system was inter-jurisdictional inequity, but that the federal government's role in redistributive policy could potentially minimize this cost. While Peterson's work focused on the expenditure side of the budget, federal governments also facilitate the redistribution of income through the tax code, but some tax bases tend to be inherently more progressive than others. Given the range of tax bases available to policy makers, the role of a tax base in income distribution is fundamental to evaluating the distributional effects of different tax structures. Using the regressivity of state and local tax systems in the U.S., this study finds that consumption taxes may impose significant equity costs when designed as sales taxes. More specifically, for each one percent increase in sales tax revenue as a share of the tax base, the system becomes 12 to 17 percent more regressive. For each one percent increase in income tax revenue as a percent of the revenue base, the system becomes 12 to 13 percent less regressive- despite the fact that United States' state governments tend to have either flat or only moderately graduated income tax rates. While this study finds that the choice of tax base can only explain about half the variation in regressivity rates, it does high light the difficulty in designing a consumption tax that achieves redistributive policy goals.

International corporate tax competition continues to exert pressure on legislatures to reduce corporate tax rates as well as the rate imposed on shareholders. To combat this pressure, this commentary recommends eliminating the corporate income tax. Instead corporations should become tax transparent so that a full taxon corporate income is imposed on corporate owners but collected initially at corporate level through a required withholding tax at the maximum rate applicable to individuals. Contemporary data processing capacity enables corporations to track share ownership and report to shareholders amounts withheld on their behalf so that they may include their shares of corporate income and claim a credit for the withholding.

This paper evaluates the impact of globalization on the tax bases of countries at varying stages of development. We see globalization as a process that induces countries to embrace greater trade and financial integration, and macro stabilization. This in turn should shift their tax base from "easy to collect" taxes [tariff, seigniorage, etc.] towards "hard to collect" taxes [VAT, income tax, etc.]. We confirm this prediction – the revenue/GDP ratio of the "easy to collect" taxes declined by about 20% in developing countries between the early 1980s and the late 1990s, while the revenue/GDP of the "hard to collect" taxes increased by 9%. The relatively small initial base of "hard to collect" taxes in developing countries implied a net 7% drop in total tax revenue/GDP. Applying panel regressions and controlling for structural factors, we find that trade openness and financial integration have a positive relationship with "hard to collect" taxes, and negative relationship with the "easy to collect" taxes. The effects of globalization in our panel regressions are even larger than the effects of the institutional and political variables combined. Fiscal revenue from financial repression has also decreased, further reinforcing these results. The high income and the middle income countries managed to more than compensate for the revenue decline of the "easy to collect" taxes, increasing the total tax/GDP. In contrast, the upper and low income developing countries experienced sizeable drop in the tax/GDP. We also identify fiscal convergence: the coefficient of variation of tax revenue/GDP measures across countries declined substantially during 1980s - 1990s. The cross country variation declined by about 50% for seigniorage, about 30% for tariff, and about 15% for the "hard to collect" taxes. These results are consistent with the notion that improving the performance of the "hard to collect" taxes is more challenging than reducing the use of "easy to collect" sources of revenue.

Growth in per-capita taxes between 1970 and 1980 is analyzed for a group of 28 large cities. Investigating the effect of tax-base composition on long-run growth reveals higher rates of tax growth for low-property-tax cities, which is partly explained by recession-induced tax increases. Such increases are not rescinded during subsequent periods of economic expansion, and the net effect is a ratcheting phenomenon in local tax growth similar to that observed for state governments. Policy considerations support the need for better financial management practice, further consideration of a countercyclical revenue sharing program, and more careful attention to variations in local tax structures in modeling local government fiscal behavior.

The main message of this report is that Pakistan can take measures to increase the tax to gross domestic product (GDP) ratio by around 3.5 percentage points over the next five years. In order to ensure a healthy long-run economic development, Pakistan needs to embrace substantial changes in tax policy aimed at increasing the buoyancy of the tax system, broadening the tax bases, reducing distortions and phasing out exemptions. Such tax reforms are also required to deal with the risks stemming from sustained large budget deficits. Failing to act sooner rather than later, only makes the problem more difficult to address without considerable instability, raises the probability of fiscal and financial disarray at some point in the future, and runs the risks of further constraining policy flexibility in future. This report highlights design ingredients for a comprehensive reform of tax policy in Pakistan. In the final analysis, the success of tax reform will depend less on the mechanism of taxation and more on the politics of taxation. Beyond adequate administrative resources and an implementation strategy, this will require a clear political recognition of the importance of the task and the willingness to persist with tax reform over the long haul.

If countries anticipate Bertrand competition in tax rates, they may expend effort that makes some of their tax payers less mobile or increases the mobility of tax payers elsewhere. I provide piecemeal evidence on what activities countries use. I analyse how such activities interact with Bertrand tax competition if the size of the group of loyal and non-loyal citizens or investors is endogenous. Further I consider the implications of tax harmonization and minimum taxes for these types of non-price competition. Home attachment reduces the intensity of tax competition, but generates a strategic disadvantage for the country that invests much in such home attachment. Harmonization of taxes and high minimum taxes can intensify countries' investment in home attachment.