Tax systems have evolved a great deal over time in response to evolving economic and social conditions, but when we consider how different the world looks today from the time taxation first entered into our daily vocabulary, we need to ask: have tax systems really kept pace with the transformation we’ve seen in other aspects of our lives?
The world around us has changed dramatically in terms of regulatory change, technological innovation, globalization, new business and consumer demands and new ways of living. We see this becoming even more apparent now, as we consider the digital economy and the emergence of previously unseen types of business.
The evolution of tax systems, meanwhile, has simply not kept pace, and we are entering a pivotal time for taxation as policymakers start to think about tax in different ways. Some have introduced new models to meet modern demands—the BEPS project is an example of this effort. However, tax is still consistently conceived of and collected across three key areas: corporations, individuals and consumption.
When it comes to corporate tax, we have seen it become a smaller part of the tax base in recent years, and some policymakers are asking whether it should be replaced by other taxes. And when it comes to taxation of individuals, various changes have been made to try and deal with perceived problems of inequality and inter-generational fairness. I think a deeper question remains to be addressed as to whether how and what we tax is fit for our present context.
It is time to rethink tax in a holistic way—to consider how tax systems really work, and what we need from them in a globally connected world. This is a big thing to think about, and, I believe, the modern context demands that it be considered through a global lens as opposed to a national one. Similarly, it is a big conversation to have, and I believe this discussion must be a dialogical one—bringing in a wide range of voices and perspectives to the issue.
Now, more than ever, there is a responsibility on all stakeholders, and on policymakers in particular, to design tax policies that are good for society. That means thinking about economics, yes, but it also means creating policies that support the desired behaviors and outcomes we want to see.