As the world's centre of economic gravity shifts towards Asia, the process of globalisation - the breaking down of barriers between countries - is speeding up. This means there's no shortage of challenges looming for our political leaders.
They'll pop up in many areas, but in a speech earlier this month the boss of Treasury's revenue group, Rob Heferen, outlined those affecting taxation. He says our present tax system, which relies heavily on taxing income - whether of individuals (48 per cent of total federal tax revenue) or companies (22 per cent) - will come under increasing pressure.
Since the introduction of full dividend imputation in the late 1980s - under which Australian shareholders get a tax credit for the company tax already paid on their dividends - the main purpose of company tax has been to tax profits earned by foreign shareholders.
But globalisation is increasing the ''mobility'' of capital (and to a lesser extent, labour), making it easier to shift to countries where tax rates are lower. Heferen says this is particularly true for multinational companies (including Australian multinationals), which now account for about a quarter of global production.
Multinationals have considerable latitude in choosing where to locate their production, making them more sensitive than other businesses to the tax rates that apply to them. Of course, many other factors will also influence such decisions: the quality of the labour force, the adequacy of the infrastructure, the rule of law, access to raw materials and access to markets for their products.
Multinationals also have some latitude in deciding in which country they'll declare their profits, notwithstanding rules that attempt to limit profit-shifting. In the case of profits, tax is likely to be a primary driver, maybe the primary factor.
''So setting tax policy to deal with multinational enterprises is an increasingly difficult task,'' Heferen says. ''Policy should support innovation and attract investment, but also help uphold the integrity of the corporate tax system.''
Because of the greater competition for foreign investment, policy makers must take into account how other countries tax multinationals, as well as the wide range of successful tax planning strategies available for companies to use.
You can see these difficulties in rules about ''transfer pricing''. ''When a firm 'trades' with itself across borders, we want to ensure it is using the prices an independent party would have paid, rather than manipulating prices to gain a tax advantage,'' he says. ''But this principle can be very difficult to enforce in practice. There are many goods which are either proprietary [in house] or rarely traded, so there may be no market price for the asset.''
Then there's the effect of financial innovation. It's now easier than ever to move funds between countries at little cost and to re-characterise financial assets from debt to equity or vice versa. These options place further pressure on the system and help firms seeking to minimise their worldwide tax.
This matters because Australia, like many countries, treats debt and equity differently for tax purposes. The problem is compounded by countries using different definitions of debt and equity.
Another problem arises from the increasing role of intangible assets - such as brands, copyright and other intellectual property, customer lists and internal processes - which are often the result of much spending on research and development or marketing.
Investment in intangible assets is growing faster than investment in tangible assets such as machines and buildings. Since intangibles have no fixed, physical form, it's much easier to relocate them to low-tax countries. Pfizer and Microsoft have moved much of their research and development to Ireland.
Going the other way is the taxation of natural resources. Unlike other resources, these are immobile. You can either develop the site or leave the stuff in the ground. And the profitability of their exploitation often depends on natural factors: the quality of the ore, or how easily it can be got at.
Because world prices are still so high, our largely foreign-owned miners are making profits far in excess of those needed to make these projects a worthwhile investment.
Taxing the gap between profit and the level needed to induce investment won't discourage investment and this is part of the rationale behind the Minerals Resource Rent Tax.
Research suggests other small, open economies like us have configured their tax systems to rely less on income taxes and more on taxes levied on less internationally mobile bases, such as resource rents, land and consumption.
''However, raising taxes on some immobile bases, most notably consumption, may also have implications for the fairness of the system, its social acceptability and the ability of the government to redistribute income,'' Heferen says. On the other hand: ''In the longer term, if we opt to keep relying on mobile bases for a high proportion of revenue, we may see increased risks for tax-base erosion and stronger disincentives for capital investment and for individuals to acquire productivity-enhancing skills.''
So, is there any way around this unpalatable choice? Heferen says one answer may be finding a different base for company tax.
The standard choice is between a ''residence'' base (you tax Australian companies on their world-wide income, but don't tax foreign companies operating in Australia) and a ''source'' base (you tax all companies just on their income from production in Australia, but don't tax Australian companies on their income from foreign production).
Like most countries, we've chosen the source base (though, strangely, not for capital gains). But some leading academics have suggested we move to a ''destination'' base, where we'd tax companies' profits on sales they made to Australian final consumers, regardless of where production occurred.
In practice, this would be a source-based tax, but with adjustments made for exports and imports. It would eliminate the incentive for companies to shift their location or their earnings to other countries.
This seems a strange approach for a country like ours, with our mineral exports being so profitable, but maybe this could be fixed with adequate resource rent taxes.
And Heferen says we shouldn't ''underestimate the power of structural change in the global economy to shape policy in new and unexpected ways''.