ABSTRACT
When the tax relations with other countries which would rule under an expenditure tax regime are considered, allowance must be made for the fact that this is likely to involve relations between a country with an expenditure tax (which we shall call an ‘ET country’) and a country with an income tax (which we shall represent as an ‘IT country’). There are some special problems which arise simply because of the difference in tax regimes. In order to isolate these problems we confine our examination in this chapter to cases in which both the ET and the IT countries are similar in their other economic characteristics (e.g. have the same general levels of economic productivity), so that in the absence of tax differences there would be no great incentive for capital or labour to move from the one country to the other; and we assume further that both countries have the same general level of tax rates (e.g. a rate of 50 percent, tax-inclusive, or 100 percent, tax-exclusive), so that there is no incentive for movements of labour or capital between them simply in order to enjoy a lower rate of tax. We are then confined to the question whether the mere difference in the tax structure - tax being on consumption expenditure in the ET country and on income in the IT country - will itself have some special tax influence on movements of capital funds or of people between the two countries.
