NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

How Globalization Affects Tax Design

James R. Hines, Jr., Lawrence H. Summers

NBER Working Paper No. 14664
Issued in January 2009
NBER Program(s):   PE

The economic changes associated with globalization tighten financial pressures on governments of high-income countries by increasing the demand for government spending while making it more costly to raise tax revenue. Greater international mobility of economic activity, and associated responsiveness of the tax base to tax rates, increases the economic distortions created by taxation. Countries with small open economies have relatively mobile tax bases; as a result, they rely much less heavily on corporate and personal income taxes than do other countries. The evidence indicates that a ten percent smaller population in 1999 is associated with a one percent smaller ratio of personal and corporate income tax collections to total tax revenues. Governments of small countries instead rely on consumption-type taxes, including taxes on sales of goods and services and import tariffs, much more heavily than do larger countries. Since the rapid pace of globalization implies that all countries are becoming small open economies, this evidence suggests that the use of expenditure taxes is likely to increase, posing challenges to governments concerned about recent changes in income distribution.

download in pdf format
   (344 K)

email paper

This paper is available as PDF (344 K) or via email.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Published: How Globalization Affects Tax Design, James R. Hines Jr., Lawrence H. Summers, in Tax Policy and the Economy, Volume 23 (2009), University of Chicago Press (p. 123 - 157)

Users who downloaded this paper also downloaded these:
Hines and Summers How Globalization Affects Tax Design
Aizenman and Jinjarak w11933 Globalization and Developing Countries - A Shrinking Tax Base?
Summers and Zeckhauser w14359 Policymaking for Posterity
Dharmapala and Hines w12802 Which Countries Become Tax Havens?
Hines w10936 Do Tax Havens Flourish?
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us