In Search of Lost Revenue: Why Restoring Fiscal Soundness After a Crisis is Harder Than it Looks

Author/Editor:

Masato Miyazaki

Publication Date:

June 1, 2010

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This note argues that because fiscal deficit after a crisis owe much to a drop in tax revenues and a sluggish revenue growth, its adjustment has to rely more on revenue augmentation than commonly thought. Cutting extra spending in the wake of the crisis would not balance the book, while a natural growth of tax revenue after the recovery may take a long time before financing the pre-crisis level of expenditure. Faced with unpopular choices, the government may implicitly prefer seeing higher inflation.

Series:

Working Paper No. 2010/137

Subject:

Expenditure Financial crises Fiscal consolidation Fiscal policy Labor Public employment Revenue administration

English

Publication Date:

June 1, 2010

ISBN/ISSN:

9781455201204/1018-5941

Stock No:

WPIEA2010137

Pages:

21

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