Globalization and its Implication on Tax System

As international economic integration deepens, a more comprehensive tax reform becomes a necessity. The reform aims at minimizing the potential revenue loss from mobile factors, namely, capital and high skilled labor. However, these reforms have their own shortcomings, for example, an inequity issue, revenue loss etc. In comparing the three tax reform proposals of Europe and USA this paper provides the direction of future tax reform for Korea in a globalized world. Most of all, the prospects for the Dual Income Tax system appears more bright than ever. Many countries already moved away from capital income taxation and the DIT may be the final destination. The DIT, of course, has its own problem like a arbitrary splitting of labor and capital income. But it preserves one of the basic principle of taxation, i.e., equity principle while treating all capital incomes equally and preferentially. The DIT can aggravate income distribution, nevertheless. For this reason, some countries complement the DIT with a net wealth tax.