Development of Trade Finance

In the presense of increased international transactions, inter country labor mobility and multinational firms, Public financeand fiscal polices need to be reformulated in order to achieve inter-country along with intra-country distributional equity and efficiency. For example, a person of one country working in any other is subject to income tax in both countries, which is against the spirit of equity. It is desireable that his tax payment in working country, must be credited to his tax-liablilityin the parent country as practiced in U.S.A Further the country where the forigners work called country of source should be entitled to retain tax revenue. Different profit tax rates and interest rates in individual countres cause movement of capital stock from one country to another. A country with low tax rate and high interest rates absorbs capital inflows. The point for thinking is to discover such a profit-tax system and interest rate system, which results at worldwide efficiency of capital.

Similarly product taxes which discriminate between indigenous and imported goods need to be integrated to reap the fruit of comparative advantage. Some efforts through GATT and IMF have already been made in this direction.

The accepted ingredients of economic development are accelerated capital formation, technological progress, distributional equity and ability to coup with any shock/bottle neck which may arise during the prosess of economic development.A properly formulated fiscal system may help achieve these targets.For example, the target rate of economic growth is achievable only with a correesponding rate of capital formation. It requires a taxatin system which induces the desirable rate of private and public savings to be invested.