2. Understanding main points.

Answer the following questions:

1. Why has the reforming of most taxes been slow and tortuous?

2. What approaches can be taken to measure the performance of emerging market countries?

3. Is Russia an exception in the general reforming process? Please expand.

4. What changes have different taxes undergone?

5. What progress has been made in the tax systems of the emerging market countries?

4. Understanding details

Find facts to support or refute the following statements:

1. The transitional countries’ tax reform was no more than an experiment.

2. One of the methods of gauging tax policy performance was to look at how the private sector reacted.

3. The current structure of tax systems in EMC largely resembles the structure of tax systems in western countries.

4. The trend over the past several years in EMC has been toward the consolidation of rates into a lower basic or general rate.

5. Building an effective tax administration is a difficult task anywhere.

5. Summarizing

Give an outline of the major points of the text. Write the summary of the text (200-250 words) and present it in class.

Section B

1. A) Complete the text using the words in the box. Discuss the raised problems afterwards:

Tax Policy for Emerging Markets: Developing countries

tax policy; tax incentives, personal income tax, tax system, tax administration, import tariffs, tax revenue, corporate income tax, value-added tax, excises

This abstract discusses important tax policy issues facing developing countries today. It views tax policy from both the macroeconomic perspective, which focuses on broad questions such as the level and composition of (1)…, and the microeconomic perspective, which

focuses on certain design aspects of selected major taxes, such as the

(2) .., (3) …, (4) …, (5) …, and (6) … .It provides a review of the role of (7) …in these countries, and identifies some policy changes posed by the globalization of the world economy.

The study of (8) … is concerned with the design of a tax system that is capable of financing the necessary level of public spending in the most efficient and equitable way possible. In developing countries with emerging markets, and especially in those that aim at becoming integrated with the international economy, tax policy must play a

particularly sensitive role. In these countries, the (9) … should: 1) raise enough revenue to finance essential expenditures without recourse to excessive public sector borrowing; 2) raise the revenue in ways that are equitable and that minimize its disincentive effects on economic activities; and 3) do so in ways that do not deviate substantially from international norms.

In developing countries, the establishment of effective and efficient tax systems faces some formidable challenges. The first of these challenges is the structure of the economy that makes it difficult to impose and

collect certain taxes. The second is the limited capacity of the (10)

The third is the paucity, or the poor quality, of basic data. Finally, in many developing countries the political set up is less amenable to rational tax policy than in advanced countries.

b). Complete the text using the words in the box:

Diversity of tax systems

to be compatible with; social security contributions; to levy taxes; unanimity; tax measures; to standardize; customs duties; compulsory taxes

Tax policy is a symbol of national sovereignty and part of a country's overall economic policy, helping finance public spending and redistribute income. In the European Union, responsibility for tax policy mainly lies with the Member States, who may delegate some of it from central to regional or local level, depending on the constitutional or administrative structure of government.

The European Union plays a subsidiary role on taxes and (1) … .Its aim is not to (2)… the national systems of (3) and contributions but simply

to ensure that they are (4) …not only with each other but also with the aims

of the Treaty establishing the European Community. Article 269 of the EC Treaty requires the Community budget to be wholly financed from own resources. These depend on Member States' capacity to contribute. At present these own resources consist of agricultural levies, (5)… , a percentage of VAT revenue calculated on a harmonized basis and GNP-based resources. The European Union has no power to create or (6) … .

However, in the single market it is important to see that Member States'

(7) . do not hamper the free movement of goods, services and capital

or distort competition. Progress on the harmonization and coordination of taxation has been fairly slow, but this is due to the complexity of the issues involved and the fact that the relevant articles of the EC Treaty require (8) for any change.