I think we should use language-based tags over country-based tags.
This is because language-based tags are much easier to define. If a book is set in country A, written in country B by an author from country C, and becomes a classic in the culture of country D, then which of those countries should it be tagged with? The answer to this question would likely vary from book to book, but I'm sure there will be cases where it's very hard to decide.
On the other hand, "the language a book was originally written/published in" is much easier to define, and will usually correspond to the culture a book is part of (most books originally written in Russian could reasonably be counted as part of russian-literature, and so on).
IMO, tags for English-language works could be considered as a special case. If we use an english-literature
tag for every question about every book originally written in English, this tag will be on the majority of questions on the site. (Efforts to diversify notwithstanding, the fact remains that this is primarily an English-language site and the majority of our users will be primarily interested in English-language works.) It might make sense to split the tag into american-literature
, and so on, or simply not to use country/language tags at all for English-language works.