Death and Taxes May be Certain—But Taxes We Can Make Better


Mick KeenBy 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).

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Still Some Hurdles On The Fiscal Path


Martine GuerguilBy Martine Guerguil

(Versions in 中文, Français日本語, Русский, and Español)

Five years into the crisis, the fiscal landscape remains challenging. On the positive side, deficit-cutting efforts and the first signs of recovery reduced the fiscal stress felt in many advanced economies; but debt ratios often remain at historical peaks. At the same time, slowing growth and rising borrowing costs, combined with unabated demands for improved public services, puts pressure on government budgets in emerging market economies.

So we created  an index of ‘fiscal difficulty’ that shows the biggest challenge ahead for advanced economies is to maintain budget surpluses until debt ratios return to lower levels.  We expect this will take several years.

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Lagarde: Women Can Help Grow the World Economy


(Versions in Español and عربي)

Hot off the press: a new study out today from our economists pointing to the striking economic benefits that could come from increased female participation in the work force.

IMF Chief Christine Lagarde, calling attention to the findings of the paper, “Women, Work, and the Economy,” made the case for policymakers to shift into high gear and give women equal opportunities to participate in the work force.

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Can Policymakers Stem Rising Income Inequality?


By David Coady and Sanjeev Gupta

The issue of rising income inequality is now at the forefront of public debate. There is growing concern as to the economic and social consequences of the steady, and often sharp, increase in the share of income captured by higher income groups.

While much of the discussion focuses on the factors driving the rise in inequality—including globalization, labor market reforms, and technological changes that favor higher-skilled workers—a more pressing issue is what can be done about it.

In our recent study we find that public spending and taxation policies have had, and are likely to continue to have, a crucial impact on income inequality in both advanced and developing economies.

In advanced economies, this is especially important given that the ongoing fiscal adjustment needs to be continued for many years to reduce public debt to sustainable levels. But it is equally important in developing economies where inequality is relatively high.

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India’s Slowdown May Have a Silver Lining


By Roberto Guimarães and Laura Papi

The extent of the recent slowdown in India’s growth rate has surprised most India watchers even in the face of ongoing international financial market volatility, high and volatile oil prices, and the uneven global recovery.

GDP growth fell throughout 2011, from a high of 7.8 percent at the beginning of the year to 6.1 percent in the quarter ending in December. The slowdown in the economy has affected the industrial sector particularly hard and has extended to 2012 as shown by the 3.5 percent contraction (y/y) in March industrial production. For 2012/13, we at the IMF project that GDP growth is likely to be about 7 percent.

While India has been affected by the worldwide slowdown, many observers have started to question the inner strength of the Indian growth story.

By international standards 7 percent growth is still very robust, but it sometimes feels like underachievement for a country that was growing at more than 9 percent just a few years ago.

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Bringing the Informal Sector into the Fold


By Masood Ahmed

(Version in عربي)

Unemployment rates in the Middle East and North Africa have remained above 10 percent over the past decade, the highest in the world. For the young the rates are even more daunting, at a persistent 25 percent: one in four of the region’s young people are without work. Many people who cannot find jobs in the formal economy are relegated to working in the informal sector, for lower wages and without the protections and opportunities that workers enjoy in the formal economy.

The informal economy is large and pervasive—and, often, ignored; however, the experience of those who work in the informal sector came under the media spotlight when Tunisian street vendor Mohamed Bouazizi set himself on fire that fateful day in December last year, sparking the Arab Spring protests.

Estimates indicate that the informal economy in the oil-importing countries of the Middle East and North Africa is substantially larger than in several Asian and Latin American countries. In Morocco, for example, the informal economy is estimated at 44 percent of officially measured GDP. In most other oil importers, it is estimated at close to one-third.

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