Globalisation is a phenomenon that is said to have radically changed the international economy. It is said to have radically limited the power of national governments, particular in the field of taxation, in a world of highly mobile capital and flexible transnational corporations. To explore the extent of the effects of globalisation on taxation, this article discusses some ideas about how we should look at international tax policy in the face of the realities of globalisation, particularly in a world that includes developing countries, by considering the differences between different discourses on taxation, such as the economic, the legal, and the policy discourses. The policy discourse can offer new perspectives on the old question of the choice between source and residence taxation, makes it possible to understand them in terms of tax fairness criteria, and gives rise to a new criterion: the participation principle. Not only does the participation principle provide interesting approaches to some cases of concern to developing countries that have traditionally been viewed as source taxes, but the rise of digital goods do not simply shift the location of taxed activities. They can also offer creative opportunities for the developing world.

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The decisions of the European Court of Justice in applying the Treaty principles of freedom of movement to the direct taxation of individuals have been strongly criticised as taking an overly simplistic view of the interactions between national tax systems. The interactions often make non-discrimination an inappropriate criterion. This article proposes a framework, grounded in economic analysis, for understanding the implications of the interactions for freedom of movement. First, I establish a precise definition of obstacles to freedom of movement of individuals as costs of migration, as distinguished from incentives to migration (such as mere differences in national tax levels). Incentives can encourage economic distortions in migration, but they are not obstacles to migration (or free movement). Secondly, I develop the cross-migration test to distinguish costs of migration from incentives. I apply the test to show that two commonly used schemes of double tax relief, including exemption with progression, create unjustified obstacles to free movement.

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