Taxation in the Age of Digital Globalization
The Transpartisan Review #2, 48-51
4 Pages Posted: 9 Aug 2018
Date Written: June 1, 2017
Innovations in finance and information technology have radically reduced transaction costs, thereby stimulating the globalization of goods, services and capital. Capital mobility, the growth of multinational corporations, high frequency trading, complex financial instruments, and global equity exchanges, have increased the risks of global financial instability, while making the identification and assessment of income and profits by national origin increasingly obscure and difficult. Tax avoidance and evasion behaviors drastically limit the revenues and hence social expenditures of national governments whose citizens perceive existing tax systems to be overly complex, inefficient, and inequitable with high costs of administration and compliance. In contrast to the speed of financial and technological innovation, tax systems remain mired in inertia, eluding global calls for tax reform. How then, can tax systems be adapted to the digital age? There is broad consensus on the objectives of tax reform: simplification, efficiency, equity, and reduced costs of administration and compliance. Simplification and reduction in administrative and compliance costs require abandoning the plethora of loopholes and tax expenditures that well-off stakeholders have lobbied politicians to introduce by supporting their campaigns for reelection. A reformed tax law requires a clear and simple statement of what is taxable, how much it will be taxed and how the tax will be collected. A small globally adopted Automatic Payment Transaction (APT) tax, is optimal for the digital age.
Keywords: Financial Transaction Taxes, Automated Payment Transaction (APT) Tax
JEL Classification: F38, H21, H26, E26, E42
Suggested Citation: Suggested Citation