Tax Policy Challenges in the 21st Century

S. 87I. Introduction

The effects of globalization had long been predicted by Karl Marx and Friedrich Engels in the middle of the 19^th century, in the Manifesto of the Communist Party (1848).

Globalization may be defined as the process of increasing connectivity of markets and businesses. As economies become more connected to others, this creates increased opportunities and competition.

The current age of globalization (from 1915 to date) can be distinguished from the previous one (from 1870 to 1914) by the much higher mobility of capital than labour (in the previous age, before immigration restrictions, labour was relatively less mobile than capital).

A. The Transmission Mechanism of Globalization (Trade, Investments, Finance, Technology Transfer and Labour Migration)

The impact of globalization is occurring through rising trade and investment flows, greater labour mobility and rapid transfers of technology. These are the results of technological advancements and the elimination of international barriers to capital flows and trade. Since the 1970s most countries have reduced or eliminated controls on foreign currency exchange, the purchase of foreign securities, and the ability of foreigners...