Posted on March 19, 2014 by iMFdirect
By Sanjeev Gupta and Michael Keen
(Version in Español, Français, Русский, 中文 and 日本語)
These are difficult times for ministers of finance. Fiscal constraints are tight and raising economic growth a priority. At the same time, income inequality is on the rise, and so is public pressure for governments to do something about it through their tax and spending policies. What’s a minister to do? How can he or she meet these seemingly incompatible demands?
A new IMF paper provides some guidance. Governments, of course, will have their own equity objectives. What the paper aims to do is look at precisely how countries can achieve their distributional goals—whatever they are—at the least possible cost to (and maybe even increasing) economic efficiency. This can help achieve sustainable growth and, in many cases, lead to fiscal savings. An earlier study by IMF researchers found that on average, fiscal redistribution has been associated with higher growth, because it helps reduce inequality.
Filed under: Advanced Economies, Economic research, Employment, Fiscal policy, IMF, Inequality, International Monetary Fund | Tagged: developing economies, education, government spending, health, income distribution, income inequality, inequality, pension, property taxes, retirement, taxes | 1 Comment »
Posted on October 15, 2013 by iMFdirect
By Michael Keen
(Version in Español)
Benjamin Franklin famously said these are the only things that we can be sure will happen to us. Certainly taxation has been much to the fore of public debate in the last few years. The latest Fiscal Monitor takes a close look at where tax systems now stand, and where they might, and should be headed. Can we tax better, could we—if we wanted to—raise more revenue, and how does fairness come into it?
A better way to tax
The IMF’s broad advice on the revenue side of consolidation is straightforward.
- Before raising rates, broaden bases by scaling back exemptions and special treatments, and thereby getting more people and entities to pay taxes;
- Rely more on taxing consumption rather than labor;
- Strengthen property taxes; and
- Seize opportunities to raise revenue while correcting environmental and other distortions by, not least, carbon pricing (to address climate and other pollution challenges).
Filed under: Advanced Economies, Economic research, Emerging Markets, Fiscal policy, IMF, International Monetary Fund, Low-income countries, Public debt | Tagged: fiscal adjustment, Fiscal Monitor, pension, property taxes, tax, tax reform | 1 Comment »