Income Taxation and International Mobility.

Edited by Jagdish N. Bhagwati and John Douglas Wilson. Cambridge, Mass.: The MIT Press, 1989. Pp. xx, 226. $32.50.

This book consists of a collection of articles dealing with various topics relating to international migration and taxation. The fundamental topic has long been interest to Professor Bhagwati who has contributed the pioneering work in this field.

The idea of that citizens of a country even if residing abroad are still fiscally responsible to their nation is not a novel one. However, it has never enjoyed much acceptance either theoretically or practically. As for the first, the suggestion has never succeeded in firing the imagination of economic analysts. These, for the most part, have held to the notion that taxation is based on a social contract between government and residents. Those who bear the burden of taxation should also have access to public goods and services which are being financed by the proceeds generated by the tax system. As for the second, all countries of the world but two, the United States and the Philippines, have favored the schedular or residential principle of income taxation.

Ultimately, the proposals of Bhagwati and Wilson rest on the acceptance of the ability to pay as a legitimate taxation principle. This whole matter conjures up old debates about progressiveness and equity, not to forget the classical issue of societal utility maximization. Only that Bhagwati and Wilson have transferred these traditional questions to the international arena.

In effect, the editors apply the above notions to the particular contexture of economic underdevelopment. Specifically, to the emigration of labor from less developed to advanced countries. According to the editors, this movement deprives the former nations of human capital which embodied past public goods and services provided by them. In their view, this argument provides the rationale for justifying the remittance to less developed societies of tax proceeds collected from their emigrants to developed nations. Clearly, this constitutes as asymmetrical proposals insofar as no remittances to developed countries are contemplated by Bhagwati and Wilson. In the last instance, the suggested scheme is tantamount to a redistribution of world income. To that extent, it stands or falls on the merits of the moral judgment on which it is based.

The analysis of most of the contributed pieces is based on the Atkinson-Mirrlees linear optimal tax model, which not only assumes away many practical difficulties in the area of welfare economics but also postulates the existence of beneficent and effective governments.

As the field of public choice has made us aware of, governments cannot be trusted to be neutral either in defining society's objectives or in the manner in which they go about to attain them. Given the current debate on the impact of foreign aid on less developed countries, it would be a hard sell to persuade citizens of developed countries to devote their own public resources to collect revenues on non-natives which would be remitted to developing countries.

In light of the above, it would seem that regardless of the theoretical merits of the Bhagwati-Wilson proposal the practical difficulties of implementing it would be such that it does not appear likely it will be incorporated into the nascent new world order that is now taking shape. Thankfully, the emigrants from developing countries are privately meeting their responsibilities to their less fortunate compatriots, as witnessed by their large voluntary remittances, which oftentimes represent one of the main sources of foreign exchange earnings for developing countries.

Our comments should not prove discouraging to the potential reader of this book. The articles contained in it move evenly at a very high analytic level and bear testimony to the accomplished technical proficiency of their authors. They certainly are worthwhile reading for fiscal, development, labor and welfare economists. The book would also merit included in the graduate reading lists of courses in the above mentioned fields.