ABSTRACT
This chapter considers the questions within an analysis of the general role of the public sector in the world economy. The questions are: why do many increases in tax rates generate fewer new tax revenues than governments anticipate; and how does globalization affect the capabilities of governments to collect tax revenues that they desire to generate in order to fund public expenditures. The chapter shows the ways that government regulators seek to safeguard the interests of consumers and how the world's governments protect rights to intellectual property. It illustrates that the international externalities and global public goods, and what national governments or multinational institutions can do. The chapter demonstrates how the world's nations seek to protect the global environment and how increased globalization complicates governments' efforts to finance their activities. International tax competition can be harmful to society by encouraging free-riders to shift economic activities to lower-tax nations and encourages governments to establish lower tax rates that promote economic growth.
