Tax Policy

November 2017

Inequality

"Optimal Tax Administration" Michael Keen and Joel B. Slemrod; WP/17/8.

"Taxation and the Peer-to-Peer Economy" Aqib Aslam, Alpa Shah; WP/17/187.

"Peer Pressure: Tax Competition and Developing Economies" Michael Keen, Jim Brumby; IMFBlog; July 2017.

"Tax Justice for Development—Tackling Spillovers and Incentives" Erica Gerretsen, Luckystar Miyandazi, Martin Christensen, Sanjeev Gupta; capacity4dev.eu; July 2017.

"How to Establish a Tax Policy Unit" Joe Procopio; How-to-Note 17/02.

"False Profits" Michael Keen; Finance & Development; September 2017; Vol. 54, No.3.

"The Evolution of Potential VAT Revenues and C-Efficiency in Advanced Economies" Junji Ueda; WP/17/158.

"Tax Administration and Firm Performance: New Data and Evidence for Emerging Market and Developing Economies" Era Dabla-Norris, Florian Misch, Duncan Cleary, Munawer Khwaja; WP/17/95.

"Tax Administration Reforms in the Caribbean: Challenges, Achievements, and Next Steps" Stephane Schlotterbeck; WP/17/88.

"IMF Conditionality Supports Revenue Collection: Is It Just Tax Rates?" Ernesto Crivelli and Sanjeev Gupta; Applied Economic Letters; September 2017, pp. 1–4.

"Medium-Term Budget Frameworks in Sub-Saharan African Countries" Richard Allen, Taz Chaponda, Lesley Fisher, Rohini Ray; WP/17/203.

"Stressing the Public Finances—The UK Raises the Bar" Vitor Gaspar, Jason Harris; PFM Blog; July 2017.

"Politics and Budgets" Vitor Gaspar, Sanjeev Gupta, Carlos Mulas-Grenados; EconoMonitor; June 2017.

"Regulating Local Government Financing Vehicles and Public-Private Partnership in China" Hui Jin, Isabel Rial; Journal of Infrastructure, Policy, and Development; 2017; Vol. 1, Iss. 2, pp. 190–215.

"Building Fiscal Institutions in Fragile States" Katherine Baer, Sanjeev Gupta, Mario Pessoa; IMFBlog; August 2017.

"How to Strengthen the Management of Government Guarantees" Sandeep Saxena; How-to-Note 17/01.

"Emissions and Growth: Trends and Cycles in a Globalized World" Gail Cohen, Joao Tovar Jailes, Prakash Loungani, Ricardo Marto; WP/17/191.

"Reforming Energy Policy in India: Assessing the Options" Ian Parry, Victor Mylonas, Nate Vernon; WP/17/103.

"Pension Shock" Mauricio Soto; Finance & Development; June 2017; Vol. 54, No. 2.

"Estimation of Drivers of Public Education Expenditure: Baumol's Effect Revisited" Manabu Nose; International Tax and Public Finance; July 2017; Vol. 24 Iss. 3, pp. 512–535.

"Energy Subsidy Reform: Difficult Yet Progressing" Amyra Asamoah, Emine Hanedar, Baoping Shang; VOX, CEPR's Policy Portal; June 2017.

"Dynamic Fuel Price Pass-Through: Evidence from a New Global Retail Fuel Price Database" Kangni R Kpodar, Chadi Abdallah; Energy Economics, Vol. 66; August 2017; pp.302–312.

IMF Fiscal Monitor

Contacts in FAD

PFM Blog

Fiscal Issues at the IMF

FAD Brochure

On November 7, the Center for Global Development and the Fiscal Affairs Department co-hosted the launch of a new FAD book titled Digital Revolutions in Public Finance. Offering the first detailed assessment of the impact of digital technology on public finance, this publication is a landmark collaboration between the IMF and the Bill & Melinda Gates Foundation. During the launch, a panel of experts reflected on the fundamental questions raised in the book, offering perspectives on how digitalization can revolutionize the design and implementation of fiscal policy—and on the risks and challenges.

In a fascinating lecture, Professor Chetty harnessed the power of big data to show how upward mobility varies dramatically across US regions and counties. Big data allowed Professor Chetty to determine the impact of improved opportunities on youth-results that would not have been apparent otherwise. Based on these results, he argued that improving childhood opportunities requires targeting policy changes at the local level such as the quality of education, social norms, and segregation.

Rising inequality and slow growth in many countries has focused attention on policies to support inclusive growth. While some inequality is inevitable in a market-based economic system, excessive inequality can erode social cohesion, lead to political polarization, and ultimately lower growth. The October 2017 Fiscal Monitor documents trends in inequality and shows that fiscal policy is a powerful instrument for achieving redistribution objectives. It addresses in three salient policy debates: progressive taxation, the introduction of a universal basic income, and the role of public spending on education and health.

A three-panel event, organized by the Platform for Cooperation on Tax (IMF, OECD, UN, WB), and hosted by the IMF, discussed the MTRS approach to tax system reform, including its four interdependent components: (i) building broad based consensus on revenue goals; (ii) designing a comprehensive reform of tax system; (iii) committing sustained political support to implementation; and (iv) securing resources donors for effective implementation. The MTRS can be used across a range of economies to help promote discussion of tax system reform goals with civil society and enhance countries’ revenue mobilization efforts. The videos are available by clicking the following: panel 1, panel 2, and panel 3.

Launched for government officials and staff of international organizations on October 18, 2017, the course has been a huge success. With over 1,200 participants enrolled, the course is the most popular IMF online course restricted to government officials, to date – with participants from every region, and significant interest from those in fragile states. So far, there has been active participation on the course discussion forum about various aspects of PFM, in particular Gender Budgeting, PFM reforms, and Fiscal Rules! Stay tuned for the next offering as a “massive open online course (MOOC)" in Spring 2018!

More than 100 Annual Meetings participants attended an EU-IMF Strategic Partnership Event on effective governance for infrastructure. Investment in infrastructure is badly needed in both developed and developing countries, to secure inclusive and sustainable growth. Minister Sori-Coulibaly (Burkina Faso), DG Manservisi (EC), and Messrs. Bhattacharya (Brookings) and Gaspar (FAD, moderator) shared how their institutions are strengthening the governance of public investment as well as key lessons for policymakers confronting large infrastructure bills, either after an emergency or for long-term resilience-building. Collaboration between the EU and the Fund has been reinforced with the 2016 EU-IMF Strategic Partnership Framework for Developing Countries to develop capacity in member and partner countries to achieve Sustainable Development Goals.

The workshop's main objectives were to propose ideas on how Uganda's Revenue Authority could make better use of existing technologies to improve its performance and outcomes, and to propose new technologies that could help the URA improve its operations, broaden the tax base, and combat tax evasion. Over seventy participants from Uganda’s public sector agencies, the private sector, donor agencies, tax agencies from other Sub-Saharan African countries, and the tech incubation sector took part in the event, resulting in seven innovative proposals that have been incorporated into a medium-term revenue strategy for Uganda.

The third Tokyo Fiscal Forum, jointly organized by the Japan’s Ministry of Finance and Asian Development Bank Institute (ADBI) was held on June 5–6. The challenge of formulating and implementing fiscal policy in an age of radical uncertainty was the core topic of the forum with general agreement amongst participants that the needs of the next generation should be taken into consideration when designing today’s fiscal policies. Mr. Taku Otsuka, State Minister of Finance, opened the forum by highlighting the particular challenges Japan is facing due to its rapidly ageing population and the government’s plans to address them though improvement in labor participation and productivity.

Philippe Wingender won the Richard A. Musgrave Prize for the best article published in the National Tax Journal in 2017. His paper, "Income Effects on Maternal Labor Supply: Evidence from Child-Related Tax Benefits," co-authored with Sara LaLumia (Williams College), looks at the impact of child-related tax benefits on mothers' labor supply. The paper finds that mothers who give birth in late December are slower to return to work and earn less in the year following a child’s birth than mothers who give birth in early January. The results suggest women’s labor supply decisions made shortly after the birth of a child are much more income elastic than labor supply decisions made at other points in the lifecycle.

Richard Allen (FAD Visiting Scholar), Yasemin Hurcan, and Maximilien Queyranne won the Jesse Burkhead award for the best paper published in Public Budgeting & Finance in 2016. The paper discusses the evolving functions and organization of finance ministries in both advanced and developing countries over the past 30 years. Some finance ministries have moved from a “traditional” to an “emerging” organizational structure characterized by greater openness and transparency, elimination of silos, and increased capacity to analyze economic and fiscal policy issues. Many operational functions such as tax collection, debt management, and public procurement have been devolved to arm’s–length agencies as a result of computerization and more flexible management practices.

Even before this summer’s deadly hurricanes, the IMF has been developing its support for climate-vulnerable countries. At an Annual Meetings "CD-Postcard event", Adrienne Cheasty explained the IMF’s post-disaster financial support, and the Climate Change Policy Assessments for small states it has begun to pilot in collaboration with the World Bank. CCPAs take stock of countries’ preparation for climate change—mitigation and adaptation plans, disaster preparedness and risk management—and examine how these can be financed without undermining fiscal sustainability. Pilots in Seychelles and St. Lucia already point to lessons for innovative financing options and the possibility of a growth dividend from successful investment in resilience.

During the Annual Meetings, Delphine Prady talked about universal basic income (UBI), which has received growing attention in recent years. Part of this appeal comes from shortcomings of existing social safety nets in many countries and the chance that future trends in labor markets may require renewed forms of income support and social insurance. The talk emphasized the importance of first agreeing on the key defining features of a UBI in order to assess its desirability and feasibility.

The PFM community mourns the death of Mario Pessoa, well-known and highly-respected Deputy Division Chief and PFM expert. Mario worked in the IMF’s Fiscal Affairs Department beginning in 2006 and was previously a senior official in Brazil’s National Treasury Secretariat of the Ministry of Finance and the Federal Internal Control Secretariat. He was the author of many papers and articles on topics such as cash management, expenditure arrears, and building fiscal capacity in fragile states. He co-edited the book, Public Financial Management in Latin America: The Key to Efficiency and Transparency, published in 2015.

Press Briefing: Fiscal Monitor

IMF Fiscal Monitor video

"Macroeconomic and Distributional Effects of Personal Income Tax Reforms: A Heterogenous Agent Model Approach for the U.S." Sandra V. Lizarazo Ruiz, Adrian Peralta-Alva, Damien Puy; WP/17/192.

"Lessons from the Old Masters on Assessing Equity and Efficiency: A Primer for Fiscal Policymakers" Vitor Gaspar, Paolo Mauro, Tigran Poghosyan; WP/17/214.

"Income Inequality and Education Revisited: Persistence, Endogeneity, and Heterogeneity" David Coady, Allan Dizioli; WP/17/126.

"A Universal Basic Income: What, Why & When?"

IMF: Higher taxes for rich will cut inequality without hitting growth -The Guardian

IMF: Ease inequality through taxes, redistribution -Morning Star

IMF channels Bernie Sanders on taxes -Bloomberg

The Guardian view on the IMF's message: Yes, tax the super-rich -The Guardian

IMF cautions against tax cuts for wealthy as republicans consider them -New York Times

IMF calls for fiscal policies that tackle rising inequality -Reuters

IMF bats for universal basic income in India -The Hindu Business Line

Spend more on schooling or reduce inequality, IMF says -AFP

"Settling the Inflation Targeting Debate: Lights from a Meta-Regression Analysis" Hippolyte W. Balima, Eric G. Kilama, Rene Tapsoba; WP/17/213.

"Fiscal Stabilization and Growth: Evidence from Industry-level Data for Advanced and Developing Economies" Sangyup Choi, Davide Furceri, Joao Tovar Jalles; WP/17/198.

"Calculating Trade in Value Added" Aqib Aslam, Natalija Novta, Fabiano Rodrigues-Bastos; WP/17/178.

"Smooth Operator: Remittances and Fiscal Shocks" Kimberly Beaton, Serhan Cevik, Reza Yousefi; WP/17/165.

"IMF Lending in an Interconnected World" Jean-Guillaume Poulain, Julien Reynaud; WP/17/155.

"Cross-Country Spillovers of Fiscal Consolidations in the Euro Area" Tigran Poghosyan; WP/17/140.

"Two to Tango—Inflation Management in Unusual Times" Vitor Gaspar, Maurice Obstfeld, Chang Yong Rhee; IMF Blog; June 2017.

"Inflation Targeting, Fiscal Rules, and the Policy Mix: Cross-Effects and Interactions" Rene Tapsoba; The Economic Journal; July 2017.

"Flexible Fiscal Rules and Countercyclical Fiscal Policy" Martine Guerguil, Pierre Mandon, Rene Tapsoba; Journal of Macroeconomics; June 2017; Vol. 52, pp. 189–220.

IMF endorses Nigeria’s Economic Recovery Plan -Africa Independent Television

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