{
  "title": "Death and Taxes May be Certain—But Taxes We Can Make Better",
  "publication": "IMF Blog, October 15, 2013",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2013/10/15/death-and-taxes-may-be-certain-but-taxes-we-can-make-better",
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  "summary": "IMF broad advice on the revenue side of consolidation:",
  "sections": [
    {
      "heading": "A better way to tax",
      "content": "- IMF broad advice on the revenue side of consolidation:\n  - Before raising rates, broaden bases by scaling back exemptions and special treatments, and thereby getting more people and entities to pay taxes;\n  - Rely more on taxing consumption rather than labor;\n  - Strengthen property taxes; and\n  - Seize opportunities to raise revenue while correcting environmental and other distortions by, not least, carbon pricing (to address climate and other pollution challenges).\n- How advanced countries have performed relative to this advice:\n  - Increases in rates of value-added tax, or VAT, have been more evident than base broadening.\n  - Many countries have increased social contribution rates (linked to the financing of pensions and the like, but often affecting workers much like a tax).\n  - Effective carbon pricing remains largely unrealized.\n- Exceptions and specific measures:\n  - Portugal has managed significant VAT base broadening.\n  - \"Thirteen or so\" countries have adopted bank levies of the kind the Fund recommended in 2010.\n- Overall conclusion: countries have largely honored the advice \"in the breach.\""
    },
    {
      "heading": "Taxing times",
      "content": "- No single \"right\" size of government; revenue needs vary with country circumstances and social preferences.\n- Fiscal Monitor concept: \"tax effort\" — how well a country is doing at raising tax revenue compared with other similar countries (per capita income and other characteristics).\n- Interpretations from the Fiscal Monitor chart:\n  - A score of \"1.0\" on the horizontal axis means a country is raising pretty much the most one could expect.\n  - The vertical axis represents the additional effort needed in terms of garnering enough tax revenue to help meet half of their consolidation needs (as defined in the Fiscal Monitor).\n  - Several countries, including notably the United States, whose \"effort\" is relatively low could meet a good part of their consolidation needs by fairly modest increases.\n- Emerging markets and low-income countries:\n  - Estimated effort (not shown in the chart) is, on average, not especially low.\n  - Low-income countries with \"effort\" below their group median could raise \"3.5 points of GDP\" more by rising to that level.\n- Sources of unexploited revenue potential:\n  - In most advanced economies, flawed tax design is the predominant problem.\n  - Elsewhere, improving compliance (reducing avoidance and evasion) is the key."
    },
    {
      "heading": "The fairness factor",
      "content": "- Public acceptance of tax systems depends on perceived fairness.\n- Trends:\n  - Progressivity has fallen a lot over the last \"three decades or so\".\n  - Inequality has increased.\n- Analysis performed:\n  - Calculated the top rate of tax that would maximize revenue in advanced economies, presented as a range of percentages.\n  - Compared estimated revenue-maximizing top rates with current top marginal rates (see \"Chart 2\").\n  - In many cases, current top rates are below, or at the lower end of, the estimated range of revenue-maximizing rates.\n- Policy implication: Whether top rates should be raised depends on social judgments; the Fiscal Monitor clarifies considerations but leaves the decision to readers."
    },
    {
      "heading": "Making good tax reform happen",
      "content": "- Experience shows hard economic times are generally not good for tax reform.\n- Lessons from the Fiscal Monitor:\n  - No silver bullet exists for tax reform.\n  - Transparency is critical but may not be sufficient.\n  - Effective communication is essential — public support requires persuasion that taxes are being raised fairly and will be put to good use.\n\nSource: Death and Taxes May be Certain—But Taxes We Can Make Better, Michael Keen, October 15, 2013.\n\n---\n\n\n References\n\n- Fiscal Monitor\n- https://www.imf.org/wp-content/uploads/2013/10/chart-1-updated.jpg\n- https://www.imf.org/wp-content/uploads/2013/10/chart-2-updated.jpg\n\nSource: https://www.imf.org/en/blogs/articles/2013/10/15/death-and-taxes-may-be-certain-but-taxes-we-can-make-better"
    }
  ],
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    "Authors: Michael Keen",
    "Published: October 15, 2013",
    "IMF broad advice on the revenue side of consolidation:",
    "How advanced countries have performed relative to this advice:",
    "Exceptions and specific measures:",
    "Overall conclusion: countries have largely honored the advice \"in the breach.\"",
    "No single \"right\" size of government; revenue needs vary with country circumstances and social preferences.",
    "Fiscal Monitor concept: \"tax effort\" — how well a country is doing at raising tax revenue compared with other similar countries (per capita income and other characteristics).",
    "Interpretations from the Fiscal Monitor chart:",
    "Emerging markets and low-income countries:",
    "Sources of unexploited revenue potential:",
    "Public acceptance of tax systems depends on perceived fairness.",
    "Trends:",
    "Analysis performed:",
    "Policy implication: Whether top rates should be raised depends on social judgments; the Fiscal Monitor clarifies considerations but leaves the decision to readers.",
    "Experience shows hard economic times are generally not good for tax reform.",
    "Lessons from the Fiscal Monitor:",
    "[Fiscal Monitor](http://www.imf.org/external/pubs/ft/fm/2013/02/fmindex.htm)",
    "[https://www.imf.org/wp-content/uploads/2013/10/chart-1-updated.jpg](https://www.imf.org/wp-content/uploads/2013/10/chart-1-updated.jpg)",
    "[https://www.imf.org/wp-content/uploads/2013/10/chart-2-updated.jpg](https://www.imf.org/wp-content/uploads/2013/10/chart-2-updated.jpg)"
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