Fiscal Affairs Department (FAD) - March 2015

IMF Working Papers

"Does Conditionality in IMF-Supported Programs Promote Revenue Reform? Ernesto Crivelli and Sanjeev Gupta; WP No. 14/206.

"Medium-Term Fiscal Multipliers during Protracted Recessions," Salvatore Dell'Erba, Marcos Poplawski-Ribeiro, and Ksenia Koloskova; WP No. 14/213.

"Global Monetary Tightening: Emerging Markets Debt Dynamics and Fiscal Crises," Julio Escolano, Christina Kolerus, and Constant Lonkeng Ngouana; WP No. 14/215.

"A Fiscal Job? An Analysis of Fiscal Policy and the Labor Market," Elva Bova, Christina Kolerus, and Sampawende J.-A. Tapsoba; WP No. 14/216.

"Fragmentation and Vertical Fiscal Imbalances: Lessons from Moldova," Serhan Cevik; WP No. 14/233.

Publications

"Straight Talk: A Prudent Man's Curse," Finance & Development, Vitor Gaspar, March 2015.

"Sharing the Wealth" Finance & Development, Sanjeev Gupta, Alex Segura-Ubiergo, and Enrique Flores, December 2014.

"Bill of Health," Finance & Development, Ben Clements, Sanjeev Gupta, and Baoping Shang, December 2014.

"The Efficiency Imperative," Finance & Development, December 2014, David Coady, Maura Francese, and Baoping Shang.

"The Fiscal Policy Challenges of Monetary Union in East Africa," The East African Community: Quest for Regional Integration, Sanjeev Gupta and Jimmy McHugh.

"Taxation and Regulation of the Financial Sector” CESifo Seminar Series; Ruud de Mooij and Gaetan Nicodeme.

"A Longer-Run Perspective on Fiscal Sustainability," Empirica, Antonio Afonso and João Tovar Jalles.

"Decentralization in Africa and the Nature of Local Governments’ Competition: Evidence from Benin," International Tax and Public Finance, Gregoire Rota Graziosi, Emilie Caldeira and Martial Foucault.

"Fiscal Sustainability: a Panel Assessment for Advanced Economies," Applied Economics Letters, Antonio Afonso and João Tovar Jalles.

"Further Analysis on Leadership in Tax Competition: The Role of Capital Ownership; a Comment," International Tax and Public Finance, Gregoire Rota Graziosi and Hubert Kempf.

"The Social and Economic Determinants of Suicide in Canadian Provinces," Health Economics Review, João Tovar Jalles and Martin Andresen.

"Trade, Scale or Social Capital? Technological Progress in Poor and Rich Countries," Journal of International Trade and Economic Development, Joao Tovar Jalles and José Tavares.

“Lessons for the GST from International Experience,” India Tax Insights, October-December 2014, Michael Keen.

"Targeting, Cascading and Indirect Tax Design,” Indian Growth and Development Review, Vol 7, 2014, Michael Keen.

"Options and Strategies for Fiscal Consolidation in India,” Economic Modelling, Vol. 43, 2014, Sampawende Jules Tapsoba.

"The Effect of a Low-Rate Transaction Tax on a Highly Liquid Market,” Finanzarchiv 70, December 2014, Thornton Matheson.

"Une Base de Données sur les Recettes Fiscales en Afrique Sub-Saharienne, 1980-2010," Revue D’économie du Développement, 2014/3 - Vol. 22, pages 99- 128, Mario Mansour.

FAD Celebrates its 50th Anniversary

On December 5, 2014 over 300 fiscal policy experts—ranging from academics to policy makers and IMF staff—came together on the occasion of FAD’s 50th anniversary. The event recognized the Department's central role of fiscal policy making and discussed the challenges that lie ahead. The conference on “Fiscal Affairs—Past and Future” featured talks and presentations by Alan Auerbach (University of California, Berkeley), Ravi Kanbur (Cornell University), Stanley Fischer (U.S. Federal Reserve), and Simon Johnson (MIT), together with presentations by former FAD Directors Vito Tanzi, Teresa Ter-Minassian, and Carlo Cottarelli. Discussions and debate focused on three core fiscal areas: taxation, expenditure, and macro fiscal policy, and on the contributions—past and prospective—of FAD. Lawrence Summers (Harvard University) delivered the luncheon keynote address on the challenging theme of “Fiscal Policy for the Next 50 Years,” and Vitor Gaspar closed a full day of lively discussion by presenting the pillars of FAD’s strategy going forward.

What Happens to Public Health Spending in IMF-Supported Programs?

What-happens-to-Public-Health-Spending---cropped

The impact of IMF-supported programs on public health spending has generated considerable media attention. Recently, researchers from the United Kingdom claimed that “policies advocated by the IMF have contributed to under-funded, insufficiently staffed, and poorly prepared health systems in the countries with Ebola outbreaks.” The statement is incorrect. A blog and an comment published in the Lancet Journal written by FAD staff present evidence against it. Based on developments over 2003 to 2012, they found that public health spending rose at a more rapid pace in countries with Fund-supported programs than those without. This is especially the case for low-income countries, including those affected by Ebola outbreaks in Sub-Saharan Africa. This corroborates the findings in previous research that documented a similar pattern in periods before the global financial crisis.

FAD Launches New Book on Fiscal Unions

Does the European Union need closer fiscal integration, and in particular a stronger central budget, to become more resilient to economic shocks? A recent FAD book, "Designing a European Fiscal Union: Lessons from the Experience of Fiscal Federations," examines the experience of 13 federal states. It analyzes in detail their practices in devolving fiscal responsibilities from the central to the sub-national level, compares them to those of the European Union, and draws lessons for a possible future fiscal union in Europe. The book was launched in December at the Centre for Financial Studies (CFS) in Frankfurt, and presented at Bruegel in Brussels and the Joint Vienna Institute. Dr. Otmar Issing, president of the CFS, noted that an important contribution of the book is in showing that fiscal union is not “all or nothing”—fiscal policy sharing can take different forms and it is up to Europe to carve its own path.

Public Financial Management Conference in Chile

In November 2014, Mr. Marco Cangiano, FAD Assistant Director, and Ms. Almudena Fernandez, Technical Advisor for Public Financial Management, joined the first seminar of the Latin American Government Accounting Forum (Foro de Contadores de América Latina, FOCAL), which was organized by Chile’s Contraloría General with the support of the Inter-American Development Bank, the World Bank, and the IMF. FOCAL is a new initiative sponsored by 14 Latin American countries, along the lines of the successful parallel Latin American Treasury Forum, FOTEGAL, that FAD has been supporting since its establishment in 2010. FOCAL aims at providing a permanent forum for technical discussions in the transition process to accrual accounting and the adoption of the International Public Sector Accounting Standards (IPSAS). During the first seminar, participants focused on the importance of proper accounting standards for improving fiscal transparency and accountability, managing the transition from cash to accrual, and accounting of financial instruments.

Board Paper on Revenue Compliance

Noncompliance with tax obligations raises profound challenges not only for governments’ revenues, but also for fairness and wider trust in the tax system—and is receiving increased attention from policy makers. An FAD paper on “Current Challenges in Revenue Mobilization—Improving Tax Compliance” takes stock of the impact of the crisis on tax compliance (and the lessons learned), of what is known about the drivers of compliance, and of ways that revenue administrations can strengthen them. It also sets out a broad strategy for improving compliance, by regularly measuring and monitoring compliance trends; better understanding noncompliance and their underplaying causes; and strengthening revenue administrations’ institutional management. The paper also highlights some new tools (RA-FIT, RA-GAP, and TADAT) that the Fund has been spearheading, in collaboration with development partners, to support improving tax compliance.

Remote Delivery of TA to Liberia through the Tax Policy and Administration Topical Trust Fund

FAD has continued delivering technical assistance (TA) in revenue administration to Liberia during the Ebola crisis. The five-year Tax Policy and Administration Topical Trust Fund (TPA TTF) has been an effective vehicle to leverage on technology to deliver, via a Remote Delivery Plan, continuing TA support during the public health crisis (with about 80 percent of the original plan delivered despite of the crisis). Meetings have been held via Skype calls and messaging, Viber software, teleconferences, or in neutral locations (such as IMF HQ), while information has been shared via email and fax. This has only been possible due to the close working relationships between staff, experts, and the authorities, as well as the deep understanding of the country’s operating dynamics, that TA engagements, such as the TPA TTF, are able to generate. Key achievements over this period include the launch of the Liberia Revenue Authority (LRA) last July, capacity building in the Large Taxpayer Office, the establishment of a new taxpayer service center, and the redesign of the LRA website.

IMF-Japan Tax Conference in Tokyo

The IMF and Japanese Ministry of Finance will co-host the Sixth IMF-Japan High-Level Tax Conference for Asian Countries on April 7-9 in Tokyo. The third day, April 9, will be a session on international taxation open to the public. This will provide an opportunity for developing countries in the Asian region to discuss challenges in international taxation with stakeholders. For further information, please visit the conference website.

TADAT Field Guide Issued for Public Consultation

Development of the Tax Administration Diagnostic Assessment Tool (TADAT), has passed several milestones. The Field Guide that will be used as the basis of assessment will be posted on the TADAT website for public comment by March 30. Piloting has continued most recently in Paraguay, Norway, and Fiji; expert workshops have been held in both Washington DC and London; and registration for online training as a TADAT Assessor has opened. These activities put TADAT well on course for full release in November 2015.

FAD in the News

"IMF Sees Rising Fiscal Risks in Emerging Markets" - Xinhua News.

"Did the International Monetary Fund help make the Ebola crisis?" - Washington Post.

"IMF Loan Policies Hindered Ebola Response"- Bloomberg.

"Is IMF Austerity at Fault in Ebola Epidemic?" - Wall Street Journal.

Recent Blogs

"What Happens to Public Health Spending in IMF-Supported Programs? Another Look," Benedict Clements, Sanjeev Gupta, and Masahiro Nozaki, IMFdirect, December 2014.

"Energy Subsidies in Developing Countries: Treating the Disease While Symptoms Abate," David Coady and Baoping Shang, VOXEU, January 2015.

"How Much is a Lot? Fiscal Adjustments in Perspective," Julio Escolano, Laura Jaramillo, Carlos Mulas-Granados, and Gilbert Terrier, VOXEU, February 2015.

"Fiscal Arrangements in Federations: Four Lessons for Europe" Martine Guerguil, iMF Direct, February 2015.