June 16, 2016

Decentralizing Revenue in Latin America


By Vicente Fretes Cibils[1]

When Teresa Ter-Minassian and I took on the task of looking back to the fiscal performance of Latin America and the Caribbean in the last few decades we expected to find a lot of “could haves” and “if only’s”.  A lot of academics and journalists commonly refer to Latin America as “the region of the future”. And that is mostly true. But there is still a large hurdle that the region as a whole has to overcome if it is to achieve sustainable and inclusive growth: namely, much improved fiscal performance.

Our recently published book[2], “Decentralizing Revenue in Latin America: Why and How” looks at the extent to which seven countries — Argentina, Bolivia, Brazil, Colombia, Mexico, Peru, and Venezuela — have succeeded in decentralizing their tax systems to increase their overall revenue collections.  The book also discusses why most countries are still far from exhausting their revenue potential.  The short answer is that taxes in many countries of the region are not yet designed to promote development and growth.

Continue reading "Decentralizing Revenue in Latin America" »

May 05, 2016

China’s Tax Administration Modernization Strategy

Posted by Juan Toro and John Brondolo[1]

China’s State Administration of Taxation (SAT) has recently published the Blueprint for Deepening the Reform of Tax Administration which provides a roadmap for continuing to modernize tax administration over the next five years. The plan reflects many good practices recommended by IMF technical assistance. There are also a few areas where it can be strengthened, as described below.

Continue reading "China’s Tax Administration Modernization Strategy" »

March 20, 2015


1421 - St Elizabeth Flod

Posted By Vitor Gaspar, Richard Hughes, and Laura Jaramillo

Fortune, wrote Machiavelli five hundred years ago in The Prince, is like a violent river. She “shows her power where virtue has not been put in order to resist her and therefore turns her impetus where she knows that dams and dikes have not been made to contain her.” Managing the ebb and flow of government’s fiscal fortunes poses similar challenges today. We need a risk-based approach to fiscal policymaking that applies a systematic analysis of potential sources of fiscal vulnerabilities. This method would help countries detect potential problems early, and would allow for institutional changes to build resilience.


January 27, 2015

Book Announcement: Reconstructing Iraq's Budgetary Institutions: Coalition State Building After Saddam

  Savage, J.D
Posted by James D. Savage, University of Virginia

The invasion of Iraq led to a costly nine-year state-building and reconstruction effort. Reconstructing Iraq's budgetary institutions proved to be a vital element of the state-building project, as allocating Iraq's growing oil revenues to pay salaries and pensions, build infrastructure, and provide essential public services played a key role in the Coalition's counterinsurgency strategy.  Employing a historical institutionalist approach, this book first explores the Ottoman, British, and Ba'athist origins of Iraq's budgetary institutions. The book next examines American pre-war planning, the Coalition Provisional Authority's rule making and budgeting following the invasion of Iraq in 2003, and the mixed success of the Coalition's capacity-building programs initiated throughout the occupation. The budgetary process introduced by the Coalition offered a source of institutional stability in the midst of insurgency, sectarian violence, economic uncertainty, and occupation. This book explores the problem of "outsiders" building states, contributes to a more comprehensive evaluation of the Coalition in Iraq, addresses the question of why Iraqis took ownership of some Coalition-generated institutions and not others, and helps explain the nature of institutional change.

Continue reading "Book Announcement: Reconstructing Iraq's Budgetary Institutions: Coalition State Building After Saddam" »

April 25, 2011

Tax Matters for Developing Countries

Posted by Carlo Cottarelli and originally published on iMFdirect

You hear a lot these days—not least from me—about the fiscal problems of advanced economies. But let’s not forget the fiscal problems that low-income countries face, though they are of a different kind.

For all too many low-income countries, government tax revenues are far from enough to meet the needs of their people. Some have made good progress, and this helped them weather the crisis better than many advanced economies—but there is an underlying, quiet crisis of inadequately resourced governments.

Nor is it just the level of revenue that matters; tax design and implementation are also critical to the efficiency of economic activity, to fairness, and to the legitimacy of the state.

Continue reading "Tax Matters for Developing Countries" »

October 29, 2010

IMF Fiscal Affairs Department's Newsletter (October 2010)

Fiscal Affairs : October 2010


IMF Survey Magazine eNews

October 2010

Fiscal Affairs Department (FAD) of the International Monetary Fund

  Publication Updates

   IMF Publications

·         Financial Sector Taxation: The IMF's Report to the G-20 and Background Material


  IMF Working Papers

·         Fiscal Deficits, Public Debt, and Sovereign Bond Yields

·         Restoring Debt Sustainability after Crises: Implications for the Fiscal Mix

·         Public Capital and Growth

·         The Unequal Benefits of Fuel Subsidies: A Review of Evidence for Developing Countries


  IMF Staff Position Notes

·         Long-Term Trends in Public Finances in the G-7 Economies

·         Default in Today's Advanced Economies: Unnecessary, Undesirable, and Unlikely


  External Publications

·         Effect of Development Assistance on Domestic Health Expenditures

·         Sovereign Risk: Are the EU's New Member States Different

·         International Experience with Fiscal Rules

·         The Macroeconomics of Fiscal Consolidation in Area Euro Countries

·         Macroeconomic Effects of Greater Competition in the Service Sector


  Technical Notes
  and Manuals

·         Evaluating Government Employment and Compensation

·         Health Care Spending Issues in Advanced Economies

·         Performance Measurement in Tax Administration

·         Managing the Shadow Economy

·         Autonomy in Tax Administration and the Revenue Authority Model

·         Government Cash Management: Its Interaction with Other Financial Policies



Taxing the Financial Sector: A Report to the G-20 Leaders and Conference in Paris

Taxing the Financial SectorOne controversial issue addressed by the IMF over the past months has been the "fair and substantial contribution" of the financial sector to meet the costs of the crisis. Working with the Monetary and Capital Markets and Research Departments, FAD prepared a report for the G-20 Leaders (the final report), which attracted wide media and public interest.

The report and other European proposals were discussed at a high-level conference on financial sector taxation held in Paris on September 16. It was attended by senior officials from 35 European central banks and ministries of finance. IMF Deputy Managing Director, Mr. Portugal opened the conference.

Fiscal Policies: Effective Strategies for Stability and Growth

Fiscal Policies Panelists at 2010 Annual MeetingsDuring the IMF's 2010 Annual Meetings, FAD organized a panel discussion on the fiscal challenges ahead as the world economy exits the crisis. The panelists were Prof. A. Alesina (Harvard University), Mr. C. Cottarelli (FAD Director), Mr. P. J. Gordhan (Minister of Finance, South Africa), Prof. S. Johnson (MIT), Mr. J. Ligi (Minister of Finance, Estonia), and Mr. P. Solbes (former Minister of Finance, Spain). Ms. Z. Minton-Beddoes (Economic Editor of The Economist) moderated. The discussion focused on the need for fiscal adjustment and credible medium-term plans to reduce debt ratios, the impact of fiscal consolidation on short-term economic growth, the implications of fiscal policy actions of advanced economies on emerging markets, and the need to foster a coordinated policy response at the G-20 level.

Managing Natural Resource Wealth

FAD, the IMF Strategy, Policy, and Review Department, and the Natural Resource Charter organized a seminar during the IMF's 2010 Annual Meetings on "How Societies Can Best Manage Wealth from Natural Resources." The panel discussion included Timor-Leste Minister of Finance Emilia Pires; Andres Velasco, former finance minister of Chile; and Guillermo Ortiz, former central bank governor of Mexico as moderator. World Bank Iraq Senior Advisor, Yahia Said and FAD Assistant Director, Michael Keen also joined the discussion.

FAD In The News

The Financial Times (August 11, 2010) published an op-ed by Olivier Blanchard and Carlo Cottarelli with the title "The great false choice, stimulus or austerity." In this piece, the authors discuss the issues involved in restoring fiscal sustainability while maintaining support for the recovery.

The contrarian views held in the Staff Position Note "Default in Today's Advanced Economies: Unnecessary, Undesirable, and Unlikely" (see comment in this newsletter) sparked attention in the media. See, for example The Wall Street Journal ( "IMF Warns Countries of Debt Risks, Dismisses Idea of Greek Default" by Bob Davis, September 2). Bloomberg radio (Bloomberg surveillance, September 2) featured an interview with Carlo Cottarelli on this topic.

The evidence and recommendations in the note "Long-Term Trends in Public Finances in the G-7 Economies" (see comment in this newsletter) was also extensively covered, including by the Financial Times ("Richer or poorer: Taxing times for debt-laden advanced economies" by Chris Giles, October 7), and The New York Times ("Monetary Fund Warns G-7 on Debt Levels" by Sewell Chan, October 7).

Recent Staff Position Notes

Long Term Trends in Public Finances in the G-7 Economies"Long-Term Trends in Public Finances in the G-7 Economies", by C. Cottarelli and A. Schaechter reviews the generalized rise of public debt levels in the G-7 economies in the decades since the 1970s, when debt became the ultimate shock absorber: rising in bad times and not coming down in good times. It discusses the unsustainability of these trends going forward and offers policy options to address this problem.

"Default in Today's Advanced Economies: Unnecessary, Undesirable, and Unlikely," by C. Cottarelli, L. Forni, J. Gottschalk, and P. Mauro examines the likelihood that worsening public finances lead to a debt default in certain advanced countries. It argues that debt defaults in preceding decades have been triggered primarily by spiraling debt service costs, while the current challenges in some European advanced economies stem from large primary deficits. The paper concludes that default would make little sense for these countries: the problem is not the debt servicing burden, but the primary deficit.

Recent Working Papers

In "Fiscal Deficits, Public Debt, and Sovereign Bond Yields," E. Baldacci and M. S. Kumar explore the impact that fiscal deficits and government debt had on long-term sovereign bond yields during the last 30 years in 31 advanced and emerging market economies. It finds that increases of one percentage point of GDP in deficit and government debt lead to an increase in real interest rates of around 20 bps and 5 bps, respectively.

In "Restoring Debt Sustainability after Crises: Implications for the Fiscal Mix," E. Baldacci, S. Gupta, and C. Mulas-Granados analyze the experience of 99 advanced and developing economies in restoring fiscal sustainability after crises. They confirm earlier findings on the key importance of current expenditure cuts, but they also find that revenue-raising measures play an important role in large fiscal consolidations.

Technical Notes and Manuals

"Evaluating Government Employment and Compensation" by B. Clements, S. Gupta, I. Karpowicz, and S. Tareq discusses criteria for evaluating government employment and compensation, and options for reducing government's wage costs.

"Health Care Spending Issues in Advanced Economies" by E. Jenkner and A. Leive. Both public and total health spending have increased substantially in the past decades—a trend expected to continue, driven by ageing, rising incomes, and technological change. The note offers guidance for analyzing the evolution of public health expenditure and evaluating policy options in advanced and emerging market economies.

"Revenue Administration: Performance Measurement in Tax Administration" by W. Crandall explains performance management and its measurement, how tax administrations apply it, key tasks in implementing a performance management system, and country experiences.

"Revenue Administration: Managing the Shadow Economy" by B. Russell discusses the shadow economy and its measurement, as well as actions which revenue agencies can take to manage it.

"Government Cash Management: Its Interaction with Other Financial Policies" by M. Williams offers guidance on policy, institutional and practical issues for governments looking to develop a cash management function. It discusses the implications of active cash management for other functions such as debt management, monetary policy, and financial market development.

Technical Assistance Activities

During July–September 2010, FAD provided technical assistance to 37 IMF member countries and multi-country organizations through 42 projects.

Career Opportunities

The Fiscal Affairs Department (FAD) seeks talented and dedicated professionals with a background in different areas of public finance, to work on macro-fiscal policy issues and to provide technical assistance advice to IMF member countries on public financial management, tax policy reform, revenue administration, and different expenditure policy issues. Vacancies in FAD for staff and long-term expert positions are posted on FAD also seeks experts who are interested in occasional short-term (2-3 week) assignments; interested candidates may send their CVs to



August 27, 2010

Improving Tax Collection Using XML and Object-Oriented Technologies

Posted by William B. Trautman* 

The recent financial crisis has led not only to significant public budget deficits in the United States and around the world, but also to a heated debate over what to do about them. Some argue for increased government spending to fund stimulus programs while others argue for reduced spending. Little attention has been paid, however, to increasing the collection of tax that is already owed. While tax administration information technology projects have a long and spotty track record, the advent of electronic filing in XML format and related technologies has significant potential for improving the collection of tax revenue, particularly with respect to complex business enterprises and high-wealth individuals.

This post will discuss an XML-based technology that the US Internal Revenue Service (IRS) has tested on the largest U.S. corporate taxpayers over a recent 18-month period. The technology has yielded cost savings in terms of more streamlined audit planning and has identified significant corporate tax revenue that otherwise would have gone undetected. The technology is essentially a data management and analysis system that allows one to construct virtual economic enterprises with a degree of detail constrained only by the available data and estimate the tax compliance risk of those enterprises in real time.

Continue reading "Improving Tax Collection Using XML and Object-Oriented Technologies" »

July 16, 2010

Functionally Organized Tax Administration

Posted by Maureen Kidd

What is meant by the term function-based organization? What are the key components of a function-based organization in tax administration, and what are its advantages? What is the current experience in the use of function-based organizational structures?

TNM/10/10 provides guidance on the development of the organizational approach to tax administration. It describes the use of a function-based organization structure rather than an organization based on business product or type of customer. This kind of structure is predicated on the idea that efficiency can be optimized by grouping together similar activities executed by employees with related skills and specialties. It discusses the importance of distinguishing between the headquarters policy responsibilities and field operational activities.

Continue reading "Functionally Organized Tax Administration" »

July 09, 2010

Tax Administration in Small Economies

Posted by Maureen Kidd

How should small and micro economies organize their tax administration? Are general principles of organization difficult to apply in these situations? What kinds of organizational solutions have been adopted for tax administrations in these situations?

TNM/10/06 defines small and micro economies in the context of tax administration and discusses a number of general principles of tax administration organization. It goes on to look at the particular characteristics of tax administration in small and micro economies using the examples of Fiji and the Seychelles.

Continue reading "Tax Administration in Small Economies" »

May 21, 2010

Taxpayer Audits: Development of Effective Audit Plans & Use of Indirect Methods


Posted by Edmund Biber 1/

Tnm1005[1]  Tnm1003[1] 

The IMF 's Fiscal Affairs Department has recently published two issues in the Technical Notes and Manuals (TNM) series, both on taxpayer audits: the first one on the Development of Effective Audit Plans and the second on the Use of Indirect Methods.

The key points in these two TNMs are as follows:


Taxpayer Audit – Development of Effective Audit Plans

Can audits encourage taxpayer compliance, or do they merely verify compliance and provide a means of correcting tax assessments?

TNM/10/03 provides guidance on how tax administrations can plan their audit programs to have a significant impact across the community rather than only affecting the taxpayers subjected to audit. Developing audit plans at strategic, operational, and case levels can provide administrations with valuable opportunities to go beyond detecting and correcting non-compliance, to actually improving the overall management of the tax system, including addressing deficiencies in the law and influencing future compliance.

The technical note provides a description of what factors need to be considered in planning an effective audit program as well as a “how to” guide using a step by step explanation of the processes involved in developing tiered and cascading strategic, operational, and case plans.

Continue reading "Taxpayer Audits: Development of Effective Audit Plans & Use of Indirect Methods" »

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