Tax Conference 1999

Abstract

Increasing mobility of capital has encouraged enterprises and investors to develop global strategies. As a consequence, the physical location of management of multinational enterprises (MNEs) is much less important, and is making monitoring more difficult. Cyberspace created by the 'big bang' expansion of the Internet has presented many problems in the application of tax norms to which tax officials have been accustomed. Privatization too inevitably erodes a government's traditional tax base and requires a more rigorous and inventive system for the administration of corporate tax. Highly progressive tax structures have proven ineffective in promoting a more equal distribution of income, while tending to discourage growth and driving economic activities underground. Instead, it is believed that social objectives are better served by open and direct public expenditure programs, while tax policy should concentrate solely on revenue-raising objectives, rather than social engineering. This shift has led to a move toward proportional tax structures and a greater reliance on indirect rather than direct taxes.