ABSTRACT
Flat taxes are being promoted on the belief that they offer two valuable benefits: major gains in economic efficiency and a substantial reduction in complexity. Flat tax proposals, especially those with sources-side consumption bases, would also produce important international implications which, in turn, may affect the complexity of the tax system. This chapter discusses the international issues raised by fundamental tax reform. It describes the effects of transitional and international issues on the complexity of the tax system. The chapter explores the quantitative dimensions of tax simplification by evaluating the compliance costs of various tax reform proposals. Transitional issues arising from fundamental tax reform differ considerably between income-based and consumption-based proposals. The chapter identifies the main transitional issues arising from the most common type of flat tax, the payroll tax plus cash flow tax proposed by Hall-Rabushka for the US and by Grubel for Canada.
