Tax administration in developing countries : strategies and tools of implementation

Developing nations should adopt less sophisticated taxes (such as taxes on goods and services) to broaden the tax base and use more efficient administrative techniques. This could be achieved through a system of income withholdings (for all components of income) and through computerization. This could simplify withholding and collection by giving each taxpayer a number in a master file. Computers could also facilitate information gathering, cross checking, and audits. At present, potential tax bases are often not exploited because the application of existing laws is not possible. Because of this, administrators face major problems: a large portion of the economy is at a subsistence level and does not keep records. Where records are kept, accounting is not reliable. Taxpayer cooperation is also low for a variety of reasons: shortage of trained officials, a tradition of corruption, and because taxes are not often seen to produce better government services.Public Sector Economics&Finance,Environmental Economics&Policies,Banks&Banking Reform,Economic Theory&Research,Tax Policy and Administration

Tying hands is not commitment: can fiscal rules and institutions really enhance fiscal discipline?

Visiting Bruegel Scholar, Xavier Debrun, discusses the role of fiscal institutions, including budget rules and non-partisan agencies, in enhancing fiscal discipline.

The return of fiscal policy and the euro area fiscal rule

The text describes the theoretical developments of the assignment rules regarding fiscal and monetary policies and the respective roles in macroeconomics stabilisation. Monetary policy emerged as the dominant policy, reducing the active macro role of fiscal policy to taking care of debt sustainability. This consensus started to change, and a new view has appeared, giving a more active role to fiscal policy. The article concludes with a brief analysis of fiscal rules, followed by a discussion about the European Union fiscal framework, and its necessary revision.info:eu-repo/semantics/publishedVersio

India's Intergovernmental Transfer System and the Fiscal Condition of the States

India's fiscal deficit and steep deterioration in state finances is a source of concern. The literature abounds with references to the combined fiscal deficit of the center and the states currently at over 10 per cent of GDP. During no other eight year period has the debt-GDP ratio rose by more than 10 percentage points where the ratio of outstanding debt to GDP increased from 21 per cent in 1996-97 to 35 per cent in 2004-05 (Budget Estimate). In this paper, we contend that the lack of State fiscal discipline is due in large part to a flawed intergovernmental fiscal system that fosters fiscal profligacy at the state level. Specifically, the States are highly dependent on transfers from the Union Government, which breaks the Wicksellian link between costs and benefits. There is a lack of transparency and accountability in the system because of extensive use of inadequate revenue assignments, lack of sufficient decentralization to local bodies, and a poorly designed intergovernmental transfer system. Finally, the States are operating under soft budget constraints which encourage fiscal profligacy. In this paper, we concentrate our discussion on issues related to the intergovernmental fiscal transfer system. We contend that the high transfer dependency of the states has weakened accountability and fiscal discipline. The transfer system is also very complex and lacks transparency and coordination among the institutions in charge of implementing transfers, which together produce a cycle of distorting incentives. If the fiscal behavior of the States reflects the incentives created by the intergovernmental system, as we contend, then, absent structural reform of the intergovernmental fiscal system that addresses the perverse incentives of the current system, the fiscal trends described above are likely to persist. Although the Twelfth Finance Commission (TFC) has addressed some of the issues related to the intergovernmental fiscal system and soft budget constraint, there is still an urgent need to tackle other issues in the intergovernmental fiscal system that create perverse incentives and soften budget constraints. This emphasizes the need for the State and Union Governments of India to strengthen and accelerate the reform of India's intergovernmental system. Working Paper 06-4

Guidelines for Comprehensive Fiscal Sponsorship

This paper offers administrative, financial, and legal best practices for fiscal sponsorship arrangements; it was developed by a subgroup of fiscal sponsors practicing comprehensive fiscal sponsorship, many of whom work with the mission of advancing social justice

The role and importance of long-term fiscal planning

There is reason to hope that long-term fiscal planning can still be effective in New Zealand.IntroductionMany countries now require the regular publication of longterm fiscal projections, looking at the potential long-term costs of government spending programmes. In New Zealand, section 26N of the Public Finance Act 1989 (as amended in 2004) requires the Treasury to publish a Statement on the Long-Term Fiscal Position at least every four years. Under the act, such statements must look out at least 40 years. Their contents are the responsibility of the secretary to the Treasury (rather than the minister of finance), and the Treasury is required to use ‘its best professional judgments’ in assessing the fiscal outlook and potential risks.It is also obliged under the act to ensure that ‘all significant assumptions underlying any projections’ are included in the statement. Aside from these parameters, the act is silent on the matters to be covered, giving the Treasury considerable flexibility over the process employed to produce such documents, including the nature and extent of any consultation with external experts, the wider policy community and interested stakeholders. Since the requirement for such statements was introduced in 2004 the Treasury has published three reports. The most recent of these – Affording Our Future – was released in July 2013. Against this backdrop, this article considers:the nature of long-term fiscal planning; why long-term fiscal planning is important; why a legislative requirement for such planning is desirable; whether long-term fiscal planning actually achieves its goals; some of the uncertainties involved in long-term fiscal planning; and the potential for long-term planning in areas beyond fiscal ones

Fiscal transparency and policy rules in Poland

This paper assesses the current stance and desirable progress in the implementation of fiscal transparency and rules in Poland. An index of transparency based on Report on the Observance of Standards and Codes (ROSC), with some modifications, is also constructed in this paper, followed by proposals for making transparency and fiscal rules more efficient within Poland's fiscal policy. This study attempts to answer the following questions: Firstly, to what extent is fiscal policy transparent in the context of the standards set by the EU's regulations and the IMF's ROSC? Secondly, have the fiscal rules adopted by Poland proved to be successful in establishing fiscal policy discipline? Finally, what still needs to be changed to make both transparency and fiscal rules more efficient for the conduct of fiscal policy? To set the work in context we also provide an overview of recent advances in both the theoretical and empirical literature on fiscal transparency and rules

The Impact of Fiscal Rules on Public Finances: Theory and Empirical Evidence for the Euro Area

This paper presents a review of the most significant fiscal rules policymakers can choose from. The insights from this review are then applied to the current budgetary situation of the European Union. In the European Union, the supranational Stability and Growth Pact (SGP) should provide the necessary guidance in limiting governmental borrowing by member states. In addition to the SGP, European countries are implementing various other fiscal rules that bind central, regional and local governments. We provide empirical estimates of the effect of fiscal rules on fiscal balance, government spending and government revenues, using a Fiscal Rule Index. We find that fiscal rules have some effect on fiscal balances.euro area, fiscal policy, policy rules, fiscal sustainability

Optimal monetary and fiscal policy with a zero bound on nominal interest rates

I characterize optimal monetary and fiscal policy in a stochastic New Keynesian model when nominal interest rates may occasionally hit the zero lower bound. The benevolent policymaker controls the short-term nominal interest rate and the level of government spending. Under discretionary policy, accounting for fiscal stabilization policy eliminates to a large extent the welfare losses associated with the presence of the zero bound. Under commitment, the gains associated with the use of the fiscal policy tool remain modest, even though fiscal stabilization policy is part of the optimal policy mix