Outline of Presentation I. Trends in Revenue Mobilization ... · LVA SVN . CZE . FIN SWE ITA FRA...

I. Trends in Revenue Mobilization

II. Growth Friendly Tax Policy

III. Importance of Revenue Administration

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Outline of Presentation


3

Trends in Overall Revenues - Median tax ratios to GDP by income group

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Government Revenue

Low income Lower middle income Upper middle income High income


4

012345678

Low income Lowermiddleincome

Uppermiddleincome

Highincome

Perc

ent o

f GDP

VAT revenues

1990-1999

2000-2009

2010-20130.00.51.01.52.02.53.03.54.0

Lowincome

Lowermiddleincome

Uppermiddleincome

Highincome

Perc

ent o

f GDP

CIT Revenues

1990-1999

2000-2009

2010-2013

02468

1012

Lowincome

Lowermiddleincome

Uppermiddleincome

Highincome

Perc

ent o

f GDP

PIT Revenues

1990-1999

2000-2009

2010-20130.00.51.01.52.02.53.03.54.0

Lowincome

Lowermiddleincome

Uppermiddleincome

Highincome

Perc

ent o

f GDP

Trade Tax Revenues

1990-1999

2000-2009

2010-2013


5

020

4060

8010

012

014

0N

umbe

r of c

ount

ries

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

High income Other countries

VAT has spread out…


6

0

5

10

15

20

25

30

35

40

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Med

ian

Top

CIT

Rat

e

CIT

Rev

enue

in a

Sha

re o

f GD

P

Lower Middle Income Countries

05101520253035404550

0.00.20.40.60.81.01.21.41.61.82.0

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Med

ian

Top

CIT

Rat

e

CIT

Rev

enue

in a

Sha

re o

f GD

P

Low Income Countries

0

5

10

15

20

25

30

35

40

45

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Med

ian

Top

CIT

Rat

e

CIT

Rev

enue

in a

Sha

re o

f GD

P

Upper Middle Income Countries

0

5

10

15

20

25

30

35

40

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Med

ian

Top

CIT

Rat

e

CIT

Rev

enue

in a

Sha

re o

f GD

P

High Income Countries

CIT revenue (% of GDP) CIT rate (right axis)

AUS

AUT BEL

CAN

DNK

FIN

FRA

DEU

GRC

ISL

IRL ITA JPN

KOR LUX

MEX

NLD

NZL

NOR

PRT SWE

CHE

TUR

GBR

USA

10

20

30

40

50

60

70

10 25 40 55 70 85

2012

1980

Tax Systems Have Become Less Progressive…

0.5

1.0

1.5

2.0

1970 1975 1980 1985 1990 1995 2000 2005 2010

Ratio of Direct to Indirect Tax Revenue Top Marginal Personal Income Tax Rate, 1980 and 2012 (Percent)

Advanced economies

Emerging market economies


7 Source: IMF(2013) Fiscal Monitor, October 2013


8

5.0

7.0

9.0

11.0

13.0

15.0

17.0

19.0

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Developing Asia(WEO) Latin America and CaribbeanMiddle East and North Africa(WEO) Sub-Saharan Africa(WEO)

Median tax ratios to GDP by low and lower-middle income group


• In the least harmful way for growth...

– Growth friendly tax policy • By shifting tax composition to the least

distortionary taxes (taxes on consumption, excises, taxes on property), and broadening tax base

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• VAT – Replacing inefficient production or sales taxes by a simple VAT – Levying a VAT on a broad base, with a high threshold and

avoiding multiple rates

• CIT – Building CITs that are simple and sufficiently broad-based to

allow statutory rates competitive by international standards

• PIT – Extending the coverage of the PIT (particularly through inclusion

of smaller businesses and professionals) – Establishing coherent taxation of capital income – With effective rate structure consistent with the authorities’

distributional preferences

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• Specific tax policies helping growth – Labor participation

• Reduce ‘tax wedge’ by PIT and social contribution • Incentives for elderly/women/low skilled?

– Physical capital • Taxing rents or excess returns • Incentives for specific capital formation?

– Productivity • Incentives for R&D?

11


12

CHL IDN

MEX IND KAZ

TJK BOL RUS BGR

HND BRA CHN

POL

UZB TUR UKR LTU

ROU PER HUN NIC

COL ARG

y = 0.0336x + 32.415 R² = 0.0005

0

10

20

30

40

50

60

70

40 45 50 55 60 65 70 75 80Ta

x w

edge

(per

cent

of l

abor

cos

ts)

Employment (percent of working−age population)

NZL ISR KOR CHE

IRL AUS CAN USA

GBR JPN ISL

NLD NOR DNK

EST ESP SVK PRT GRC

LVA SVN CZE SWE FIN ITA

FRA AUT DEU

BEL

y = -0.7877x + 81.033 R² = 0.2888

0

10

20

30

40

50

60

40 45 50 55 60 65 70

Tax

wed

ge (p

erce

nt o

f lab

or c

osts

)

Employment (percent of working−age population)

Sources: Institute for the Study of Labor; Organisation for Economic Co-operation and Development; and IMF staff estimates. Note: Line shows an ordinary least squares (OLS) regression line.

Relationship Between the Tax Wedge and Employment Rate

1. Advanced economies 2. Developing economies

Source: IMF(2014) Fiscal Monitor, October 2014


• Social contribution – Widely adopted in advanced countries as a

source of social spending (pension / healthcare), because…

• ‘earmarked’ revenues to specific spending • by design (grouping), easy to understand closer

relationship between ‘burden’ and ‘benefit’ • easy to keep compliance by withholding labor

wages

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• Social contribution – Can we continue (start) to rely on it,

considering… • function as labor wedge • declining working age population • less flexibility for designing system (especially,

after fixing a system for social groups)

14


• Taxation on wealth/property – Less adopted, because…

• affecting incentives for (domestic) saving • not easy to keep compliance

15


0

1

2

3

4

5

ME

XE

ST

CZ

ES

VK

SV

NA

UT

HU

ND

EU

TUR

NO

RC

HL

FIN

PR

TP

OL

SW

EG

RC

NLD

DN

KN

ZL

ITA

IRL

ES

PC

HE

ISL

AU

SB

EL

JPN

ISR

KO

RU

SA

LUX

CA

NF

RA

GB

R

Rev

enue

Taxes on f inancial and capital transactionsEstate, inheritance and gif t taxesRecurrent taxes on net wealthRecurrent taxes on immovable property

Taxes on wealth / property

16 Source: OECD Revenue Statistics



17

Potential Collections

Adm

inis

trat

ive

Effe

ctiv

enes

s

Tax Structure

Normative Structure

Current Structure

Current Effectiveness

100%

Actual Collections

Compliance Gap

Policy Gap

‘Compliance gap’ and ‘Policy gap’

0

0.5

1

1.5

2

2.5

3

3.5

4

LUX ESP IRL DEU AUT NLD FIN DNK BEL GBR GRC FRA ITA SWE PRT CHL PER COL MEX HUN LVA

ADV EME

Compliance GapPolicy Gap

Revenue Gain from Closing Half of Compliance Gap and Policy Gap (percent of GDP)

18 Source: IMF(2013) Fiscal Monitor, October 2013


0

10

20

30

40

50

60

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Latin America ave (VAT)

EU ave (VAT)

Australia (GST)

Japan (VAT)

Colombia (CIT)

Mexico (CIT)

Mexico (Excise)

UK (CIT)

UK (Excise)

Trend in Compliance gap

19 Source: IMF(2015) Current challenges in revenue mobilization - improving tax compliance


• Effective revenue administrations – making proper use of withholding and third-

party information, implementing voluntary compliance and self-assessment

– limiting opportunities for rent seeking by designing and applying forceful and efficient strategies to deal with non-compliance

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Potential vs. Actual Compliance Gap

0%

2%

4%

6%

8%

10%

12%

2007 2008 2009 2010 2011 2012

% o

f GD

P

Potential VAT Accrued collection


0%

5%

10%

15%

20%

25%

30%

2007 2008 2009 2010 2011 2012

% o

f pot

enti

al V

AT

RA-GAP:

Diagnostic tools

21 Source: IMF(2014) Estonia: Report of the Findings from the Revenue Administration Gap Analysis Program

Integrity of the Registered

Taxpayer Base

Assessment and Mitigation of Risk

Supporting Voluntary

Compliance

Filing of Tax Returns

Payment of Obligations

Ensuring Accuracy of Reporting

Tax Dispute Resolution

Operational Efficiency and Effectiveness

Accountability and

Transparency

Performance Outcome

Areas

RA-FIT: Collects RA data and establish baselines/benchmarks

TADAT: Assessment tool


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• Global trends in shifting to tax base with less distortion – while causing concerns for equity issues

• Design of ‘each’ revenue components still matters – VAT, CIT, PIT, SC, WT

• Strengthening institutional capacity could be an important element for efficient revenue mobilization

Concluding Remarks

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IMF(2011) Revenue Mobilization in Developing Countries IMF(2013) Fiscal Monitor Oct 2013 IMF(2015) Current challenges in revenue mobilization - improving tax

compliance

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Reference

Outline of Presentation I. Trends in Revenue Mobilization ... · LVA SVN . CZE . FIN SWE ITA FRA...

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