This Chapter discusses citizenship taxation as a potential solution to the challenges posed by increasing global mobility and the digitalization of work, which have made traditional tax systems less effective. As people increasingly work, live, and invest across multiple jurisdictions, it becomes harder for states to maintain their tax bases and social contracts. Although citizenship taxation—which involves taxing citizens on their worldwide income regardless of where they live—could help address these challenges, citizenship taxation alone is too crude a basis for worldwide taxation and therefore requires adjustments. Neither citizenship nor residence alone perfectly reflect membership in a national community, which is the traditional fairness justification for the imposition of tax obligations for redistribution. Instead, combining elements of both citizenship and residence might better align tax obligations with actual community membership.
Even if a country were to conclude that citizenship taxation or a combination of citizenship and residence taxation were desirable, it would still have to find a way to enforce this tax. The example of the failure of the United States to effectively administer its citizenship taxation suggests that even powerful countries with a robust tax administration will have trouble with unilaterally enforcing tax compliance from their citizens abroad, all while weaker nations lack even the economic leverage to implement similar measures. Less attractive or economically disadvantaged countries would struggle with citizenship taxation because their wealthy citizens might relinquish their citizenship if tax burdens are too high, making the policy potentially counterproductive for these nations. While multilateral cooperation could theoretically help solve these issues, such arrangements would likely favor stronger states over weaker ones, potentially widening rather than reducing global economic disparities.