The challenge of tax reform and expanding the tax base

Abstract

My topic today is the design of tax policy, and in particular the role of socalled “tax expenditures” in income tax systems. It is a topic that is important not just in Ireland but in many other nations – including the United States. I shall begin by talking about the revenue imperative, the challenge that policymakers around the world will face as they struggle to raise revenue to rebuild public treasuries in the aftermath of the recent economic crisis.I will illustrate the importance of thinking about economic considerations, such as taxpayer behavioural response, in designing tax policy. I will then share with you some of my experiences as a member of the Presidential TaxReform Panel that was commissioned in the United States in 2005. I will conclude by discussing the perennial challenge of broadening the tax base and by suggesting institutional structures which may help to avoid raising revenue from a narrow tax base with very high rates and high distortions.