ABSTRACT
One-quarter of the world’s population lives in countries going through the largest economic experiment in history, the transition from centrally planned to market-based economic systems. This chapter examines the general direction and timing for tax reform as viewed by western economists, who at the beginning of the transition gave advice to countries in transition (CIT) governments in different capacities. The existence of implicit taxation was mentioned in the previous discussion but it is important to address it separately. Implicit taxation in centrally planned economie was as common as explicit taxation. The transition to a market economy posed hard economic questions to the new governments. In the fiscal area a fundamental question posed early on was what type of tax structure to adopt. Special tax incentives have been justified by the need of CITs to attract foreign investment. Tax incentives are just part of the more general issue for CITs of how to tax income made by foreigners.
