The Pacific Account
THE PACIFIC ACCOUNT How Asia Built Its Tax States and What It Cost
Asia did not copy the Western fiscal model. It built its own. Seven countries, seven different answers to the question of how a state funds itself - and what the bill looks like when it arrives.
Singapore chose a flat tax and compulsory savings and produced one of the world's highest living standards at one of the world's lowest tax rates. Japan chose to defer the fiscal question for thirty years and accumulated the largest public debt in the developed world - a quadrillion yen, a number with eighteen digits. South Korea built the Western progressive tax system from scratch in fifty years, starting from a per capita income comparable with Ghana in 1953. China built a state that extracts resources through ownership rather than taxation - and is now confronting the specific vulnerabilities that model creates. India introduced the largest tax reform in the history of any democracy at the stroke of midnight on July 1, 2017, in a country where twenty-two million people out of 1.4 billion pay income tax. Hong Kong maintained the leanest fiscal state in the developed world for seventy years and is now watching the political conditions that made it possible change overnight. Taiwan used targeted tax incentives to build TSMC and the world's most strategically important industrial cluster.
And in the final section: Thailand, stuck in the middle-income trap partly because its VAT has been "temporarily" held at seven per cent since 1997. Malaysia, which introduced a well-designed GST in 2015, watched it become politically toxic because of a corruption scandal, and abolished it within three months of a new government taking office.
The Pacific Account is the record of what was tried, what worked, what failed, and what the evidence shows about the most consequential fiscal experiments of the past century. Asia's experiments are not finished. The account is ongoing.
Volume VII of The Taxation Series
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