- Liam Ebrill
- Published Date:
- August 1999
Main tax policy initiatives launched by CIS countries between 1997 and early 1998 are described below.
All CIS countries have unified VAT rates except for Russia and Uzbekistan. In these two countries, dual-rate structures were introduced, comprising a basic rate and a reduced rate of 10 percent on basic food items and, in Russia, some other “necessary” goods.
While there has been some progress in broadening coverage, a large number of exemptions and zero-rated items remain in many countries, even after the adoption of new tax codes (e.g., Georgia). During 1997, a number of exemptions were removed in Azerbaijan (foodstuffs, non-CIS imports), Belarus, and Ukraine (electricity for business use). However, the amendment to the VAT law in Ukraine introduced many additional exemptions. In Moldova, the reduction in VAT exemptions implemented in the beginning of 1997 was later partially reversed by parliament: however, a new government and parliament eliminated a large number of exemptions in mid-1998. A few countries (Armenia, Georgia, and Ukraine) raised the exemption threshold for small traders and Georgia extended the VAT to nonjuridical persons. Tajikistan eliminated most VAT exceptions; agricultural products are now subject to VAT.
In most cases the VAT continued to be implemented according to the origin principle for trade with CIS countries and the destination principle for non-CIS countries.20 However, in 1997 Armenia and Moldova switched to the destination principle for CIS countries and Kazakhstan and the Kyrgyz Republic made partial moves in that direction. Effective January 1, 1998, Georgia switched to the destination principle with all the Baltics, and other countries of the former Soviet Union, except Russia. Belarus and Russia imposed in the law a 20 percent VAT on imports from Ukraine while retaining the VAT on their exports. It is not clear, however, that this VAT on imports has been applied by Russia.
Regarding accounting and payment procedures, the assessment of VAT liabilities was shifted to an accrual basis in Kazakhstan, although certain transitional problems remain to be addressed. Azerbaijan, Georgia, and Ukraine began to require invoices, and together with Tajikistan and Uzbekistan, also started to grant immediate credit for VAT paid on inputs. The retail sector was shifted from the gross margin basis to a credit method in Armenia, Azerbaijan, and Ukraine. Starting in 1997, excess credits were to be refunded on a timely basis in Georgia, Tajikistan, and Ukraine. In Armenia and Ukraine VAT on imported goods is to be collected by Customs, instead of after the domestic sale takes place. The Kyrgyz Republic has adopted an accrual invoice-based VAT with a credit mechanism for inputs. Rates are unified, but the agricultural sector is exempt.
In Kazakhstan, the Kyrgyz Republic, Tajikistan, and Turkmenistan, the coverage of excises was extended to include petroleum and petroleum products, with rates unified for domestic and imported production. Moldova reduced the number of excisable goods to more manageable levels and a draft law to this effect is under preparation in Ukraine. In Tajikistan, specific rates replaced ad valorem ones.
Several countries modified the structure of excise tax rates. Rates were raised significantly on certain products in Armenia, Kazakhstan, the Kyrgyz Republic, Moldova, and Turkmenistan. In Kazakhstan, the rate hike was accompanied by a lowering of rates on other products. These adjustments represent moves (albeit incomplete in many instances) toward the alignment of rates with international levels, the elimination of disparities vis-à-vis neighboring countries, and the equalization of rates for imported and domestic products. Tajikistan equalized excises on domestic goods and imports and corrected an anomaly whereby domestic production was taxed more heavily than imports.
The choice between specific and ad valorem rates has been an issue in some instances. While a few countries at present maintain an ad valorem approach, the authorities in many cases have felt that the potential revenue loss from inflation was outweighed by concerns regarding potential underinvoicing under the ad valorem approach. In Armenia and Georgia rates for cigarettes and alchoholic beverages were switched to a specific basis.21 A floor price and an ad valorem excise rate are applied to gasoline in Armenia. In the Kyrgyz Republic, specific rates on cigarettes, alcoholic beverages, and petroleum products are set in U.S. dollar terms to avoid erosion of effective rates due to domestic inflation. Tajikistan recently adopted specific excises of tobacco, alcohol, and petroleum products to help combat overinvoicing.
Custom Duties and International Trade Taxes
There was some reduction in the dispersion of import duty rates during the year (Armenia, Kazakhstan, and Ukraine) and Tajikistan adopted a low 4 percent customs rate with only four exemptions. Georgia replaced the prevailing low uniform rate by a dual-rate structure, with a basic rate of 12 percent and a rate of 5 percent applicable to selected raw materials. In Azerbaijan, the uniform rate of 15 percent (which in practice applied to a narrow base due to exemptions) was supplemented by a lower rate (5 percent) for capital goods, accompanied by some reduction in exemptions.
Export taxes were abolished in Azerbaijan and the Kyrgyz Republic, and eliminated on all but two items in Ukraine. During the course of 1998 Tajikistan reintroduced and then eliminated a number of export tariffs.
In other areas, Azerbaijan and Russia eliminated a number of import exemptions, while the personal duty-free allowance was reduced in Armenia, Azerbaijan, and Moldova.
Corporate Income Tax
Several countries passed legislation unifying the rate of corporate income tax as follows: Azerbaijan (32 percent); Georgia (20 percent); the Kyrgyz Republic (30 percent); Moldova (32 percent); Tajikistan (30 percent); and Ukraine (30 percent). Armenia reduced rates to two (15 percent and 25 percent) while Kazakhstan implemented a three-tiered system (30 percent for legal entities; 20 percent for special economic zones; and 10 percent from the direct use of land).
Some progress occurred in reducing special regimes (i.e., preferential rates, specific allowances, and exemptions) in Armenia, Georgia, and Ukraine; this is also envisaged in the proposed Russian tax code. However, the recently passed Law on State Investment in Kazakhstan provided for increased tax exemptions for a broad category of investment activities.
Other modifications introduced included the adoption of accrual accounting (Kazakhstan, Ukraine); permission to deduct all legitimate business expenses (Armenia, Azerbaijan, Georgia, Moldova, Ukraine); limits on the deductibility of general reserves (Armenia, Ukraine); the simplification of depreciation rules (Armenia, Georgia, Moldova, Ukraine); indexation of assets for inflation (Ukraine); the inclusion of reasonable loss carryover provisions (Georgia, Moldova, Ukraine); and, by way of what could be viewed as presumptive taxation for small businesses, the introduction of a 5 percent sales tax on all enterprises (Uzbekistan); in the Kyrgyz Republic a land tax was introduced as a presumptive tax on agricultural income.
Personal Income Tax
Georgia and Moldova expanded the tax base to include previously exempt groups. Similar measures are envisaged for Russia and Ukraine (proposed).
The rate structure was simplified in Moldova to encompass only two rates and Turkmenistan adopted a single tax rate. The proposed legislation for Ukraine and Russia also provides for a simplification and restructuring of tax rates.
In other initiatives, attempts to limit personal allowances and exemptions were successful in Georgia and were proposed in Russia. Similar efforts were rejected by the Kyrgyz parliament, and are being strongly opposed by the Ukrainian parliament; Georgia, Moldova, and Ukraine also moved to include noncash remuneration. Finally, Georgia and Moldova introduced withholding taxation on interest income; introduction of a similar measure by the end of 1997 was a structural benchmark under the IMF’s ESAF program with Armenia. In Ukraine, withholding on interest is included in the proposed income tax legislation.
Very little was planned (or indeed achieved) by way of reform of the payroll tax system during 1997, especially as regards broadening the tax base. Nevertheless, with a view to improving compliance, tax rates were reduced in Georgia by 2 percentage points, in Tajikistan by 8 percentage points, and in Ukraine by 3 percentage points. In Ukraine this was accompanied by a 0.5 percentage point increase in the share of the employee’s contribution. The Kyrgyz Republic increased the payroll tax by 2 percentage points, to cover new health insurance, while Azerbaijan raised the tax rate on self-employed and individual contractors from 5 to 20 percent.
Other Fees and Charges
During 1997, Kazakhstan, Turkmenistan, and Uzbekistan introduced user fees, while in Azerbaijan the free use of public utilities was eliminated. In Ukraine, proposed legislation provided for the elimination of some fees and introduction of others. A planned doubling of the auto registration fee in the Kyrgyz Republic has not yet occurred.
The land tax was adopted by the Kyrgyz Republic as a presumptive tax on agricultural income. By contrast, in Tajikistan land tax rates were lowered. During 1997 Uzbekistan introduced gold royalties which is a resource tax on gold.
Apart from modifications to the applicable excise tax regime, initiatives in the area of energy taxation were confined to only a few countries. In Ukraine, the elimination of the tax exemption for joint ventures (see above) implies that in theory such firms in the energy industry will henceforth be subject to profit taxes, but firms can apply for exemption on an individual basis. Also the enterprise tax law in Ukraine restricts all depreciation and field development costs to offsetting income from specific fields (“ring fencing”) to help ensure incentives for investment while maintaining revenues from current fields. Similar provisions are included in the proposed tax code for Russia.
A one-time incentive scheme for the clearance of tax arrears was implemented in Kazakhstan and Ukraine, which also provided for a tax amnesty, while there were attempts to implement such a scheme in Turkmenistan.
A few countries (Azerbaijan, Kazakhstan, and Moldova) planned to reduce and/or eliminate barter and clearing arrangements during 1997. Kazakhstan was not fully successful, but in Moldova some reduction in use of payment in kind for pensions occurred, albeit less than targeted.
In Tajikistan, presumptive taxes on cotton and aluminum were converted to sales taxes as planned; these sales taxes are to be eliminated over time, beginning in January 1999, with agricultural producers being made subject to the profits tax. Belarus introduced a sales tax on vodka, tobacco, and jewelry as part of the 1997 budget.
In Russia, a presidential decree eliminating all tax offsets for the federal government was passed in 1997 (effective from 1998).22
In Armenia, starting in August 1997, the government abandoned the use of netting-out operations.
|Tax and Issues||Subjective Ranking1||Status|
|Number of rates||1||Majority of countries maintain single rates; Russia and Uzbekistan have introduced preferential rates.|
|Degree of exemptions||3||Some reform, but by and large either as extensive as originally or marginally restricted; even in countries with new codes, exemptions remain excessive.|
|Input credits for capital purchases||1||Largely corrected in the laws; however, in practice the refusal to give refunds of excess credits vitiates the effect.|
|Adoption of credit/invoice method for all transactions; elimination of gross margin method||2||In roughly half of the relevant (non-Baltic) countries, this has been changed to apply credit/invoice method through the retail level.|
|Adoption of destination basis for all trade, including with the CIS countries||2–3||A few countries have recently adopted destination basis in the law.|
|Enterprise Profits Tax|
|Progress on accounting system||3||Little reform.|
|Unification and level of rates||1–2||In general, satisfactory.|
|Removal of holidays and incentives||3||Little improvement; even some countries that had restricted these somewhat have reversed course.|
|Appropriate business deductions and depreciation||2||Improvement in most countries.|
|Elimination of excess wage tax or equivalent limitations||1||Largely eliminated; three countries retain some limitations on deduction of wages.|
|Implementation of loss carryforwards||1||Adopted in most countries.|
|Limited coverage||2–3||Good progress in appropriately limiting coverage in some; others still cover far too many products.|
|Symmetric treatment of imports and domestic production||3||Not yet achieved.|
|Rate levels||2||Rates in general are low.|
|Specific vs. ad valorem rates||1–2||Movement toward specific rates for alcohol and tobacco.|
|Personal Income Tax|
|Rates||1–2||Roughly two-thirds of the countries have achieved appropriate rate structures.|
|Final withholding on interest and dividends||2||Roughly half of the countries have final withholding.|
|Use of presumptive taxes for small business||3||Effective taxation of small businesses in all the countries is still a major problem.|
|Uniform rates||2||Some progress toward uniform rates.|
|Abolition of export duties||1||Almost all eliminated.|
|Duty-free import level||1–2||Mainly adequate; but again even where progress has been made on achieving suitable levels some countries have turned back.|
|Rates||3||Essentially no reductions; all countries are still at least in the mid-thirties, ranging into the mid-forties.|
|Status of Legal Drafting and Consolidation Reforms||As of mid-1997, almost all of the Baltics, Russia, and other countries of the former Soviet Union have passed either new codes, covering most taxes, or have passed one or more of a series of completely revised individual tax laws.||The quality varies greatly, however, with respect, both to transparency of the law and to degree of reform of the policy content.|
|Rates||Exemptions||Treatment of Capital Goods– Credit for Inputs?||Gross Margin Taxation of Trade||Origin/Destination Method for CIS Trade|
|Armenia||Single rate||Improved||Yes||All credit/invoice||Destination in law|
|Azerbaijan||Single rate||Little improvement||Yes||All credit/invoice||Origin|
|Belarus||Two rates||Improved||Yes||Origin, except Ukraine|
|Estonia||Single rate||Improved||Yes||Not applicable|
|Georgia||Single rate||Improved||Yes||All credit/invoice||Destination|
|Kazakhstan||Single rate||Improved||Yes||All credit/invoice||Origin, except for the Kyrgyz Republic and Ukraine|
|Kyrgyz Republic||Single rate||Improved||Yes||All credit/invoice||Destination Kazakhstan and Ukraine; origin others|
|Latvia||Single rate||Improved||Yes||All credit/invoice||Not applicable|
|Lithuania||Single rate||Improved||Yes||All credit/invoice||Not applicable|
|Moldova||Single rate||Little improvement||No||Still have gross margin||Origin (1998 budget changes)|
|Russia||Standard and reduced (2)||Improved||Yes||Still have gross margin||Origin|
|Tajikistan||Single rate||Improved||Yes—in new code||Credit/invoice in new code||Origin for CIS; exports to non-CIS countries exempt without tax credit, while imports taxed; fixed in new code|
|Turkmenistan||Single rate||Little improvement||No||Still have gross margin||Origin|
|Ukraine||Single rate||Little improvement||Yes||All credit/invoice||Destination, except Russia and Belarus|
|Uzbekistan||Standard and reduced (2)||Little improvement||No||Still have gross margin||Origin (1998 budget would change)|
|Coverage||Treatment of Imports Versus Domestic||Rate Levels||Specific Versus Ad Valorem Rates for Alcohol and Tobacco|
|Armenia||Too broad||Harmonized||Too low||Specific|
|Azerbaijan||Improved||Recent proposals to harmonize||Too low; although rates on petroleum products increased twice in 1998||Mixed|
|Belarus||Too broad||Not fully harmonized||…||…|
|Estonia||Good||…||Too low (petroleum goods)||…|
|Georgia||Good||Not fully harmonized||Too low||Specific|
|Kazakhstan||Improved||Not harmonized||Improved; still low||Specific|
|Kyrgyz Republic||Too broad||Harmonized||…||Specific|
|Latvia||Good||Harmonized||Too low (petroleum)||Specific (shifting)|
|Lithuania||Too broad||Harmonized||Improved, still low||Specific|
|Turkmenistan||Too broad||Harmonized||Improved||Ad valorem|
|Ukraine||Broad||Not harmonized||Improved; still low||Specific|
|Uzbekistan||Improved||Not harmonized||Too low||Ad valorem|
|Progress on Accounting||Rates–Levels and Unification||Holidays/ Incentives||Appropriate Deductions for Business Expenses||Excess Wage Tax or Equivalent||Loss Carryforward|
|Tajikistan||No||Not improved||Inappropriate||No1||Still have1||No1|
|Turkmenistan||No||Not improved||Inappropriate||No||Still have||No|
|Ukraine||New law||Improved||Law improved but cabinet discretion||Improved||None||Yes|
|Rates on Imports–Unification and Levels||Export Duties Removed?||Duty-Free Import Level for Individuals|
|Azerbaijan||Good||Yes (strategic export tax)||$200|
|Latvia||Improved||All but four items|
|Ukraine||Improved||Yes, except on two items||$100|
|Rates||Final Withholding on Interest and Dividends?||Presumptive Taxes on Small Business|
|Kyrgyz Republic||Slightly high||Yes||Yes|
|Uzbekistan||Too high||No taxation under PIT||Yes|
|Tax Administration (Legal Framework)||Organization|
|Country||Tax administration law||Legal powers for collection enforcement||Legal provisions for taxpayers’ rights||Organizational structure||Large taxpayer unit|
|Armenia||Yes.||Yes.||Yes.||Mixed (by type of tax, type of taxpayer, and function).||Yes. for the largest 220 taxpayers.|
|Azerbaijan*||Planned for 1998.||Yes.||Yes.||By function.||Yes.|
|Estonia||Yes.||(not clear.)||Yes.||By function.||(not clear.)|
|Georgia*||Tax code approved in 1997.||Yes, in new tax code.||Yes, in new tax code.||By function.||Yes, for the largest 230 taxpayers.|
|Kazakhstan*||Yes, part of 1995 tax code.||Yes, Article 172 of tax code.||Yes, Article 142 of tax code.||Order initiated for functional organization (Sept, 1997).||No separate official large taxpayer unit.|
|Kyrgyz Republic||Yes; part of tax code.||Yes, but court approval required.||Implicit in tax code.||By taxpayer, but moving to functional.||Yes.|
|Latvia||Amendments planned||Yes.||(not clear.)||By function.||Established in 1995, it now covers the 200 largest taxpayers.|
|Moldova||Formal tax administration code to come in force in January 1999.||Yes, but not always used.||Yes.||Mixed (by type of tax, type of taxpayer, and function).||Work under way to establish a large taxpayer unit.|
|Russia*||Draft tax code submitted to Duma.||Civil code takes precedent over tax laws.||In the new tax code.||Mixed organizational structure, but local offices are moving toward a functional organizational structure.||Planned for in 1997 (about 15-20 large taxpayer units).|
|Tajikistan||Planned for 1998/99 reforms.||Planned for 1998/99 reforms.||Planned for 1998/99 reforms.||Planned for 1999.||Established in 1998.|
|Turkmenistan||No, perhaps in 1998/99.||No.||No.||Mixed (any type of tax, type of taxpayer, and function).||No, but there is a concentration on large taxpayers within the existing organizational structure.|
|Ukraine*||No single law exists.||Only a limited range with uncertainty on how to apply powers.||No.||Moving toward a functional organizational structure.||Large taxpayer units established in 6 oblasts.|
|Uzbekistan||Yes.||Yes.||Limited,||By taxes and regions.||Planned.|
|Strategic plan||Annual audit plan||Annual taxpayer register||Existence of a unique Taxpayer Identification Number||Self-assessment|
|Armenia||Yes.||Part of strategic plan.||Yes.||Yes.||Yes.|
|Azerbaijan*||No.||Yes.||Yes,||Only for profits tax. Taxpayer identification number remains an issue for 1998.||Yes|
|Estonia||Under development.||Yes.||Yes.||(Not clear.)||Yes.|
|Georgia*||An effective informal strategic planning process exists, but no formal written plan has been produced.||Under development.||Yes.||Yes.||In the new tax code.|
|Kazakhstan*||Yes, but priorities have not been implemented.||Partially, an action plan specifies priority areas for audit, but does not provide complete guidelines for field audits.||A national register is under development.||No, unique only within each rayon.||In law, but not in practice.|
|Kyrgyz Republic||No.||No.||Yes, but coverage restricted to businesses.||Assignment of unique taxpayer identification number planned for March 1999.||Yes but limited.|
|Latvia||Under development.||Yes, and there are plans to select taxpayers on the basis of objective risk criteria.||The business register is completed.||Yes.||Yes,|
|Lithuania||Yes.||Yes.||Enterprise registration number.||Only VAT payers.||Yes.|
|Moldova||Yes.||No.||Yes, but coverage incomplete.||Taxpayer identification numbers are being introduced.||No.|
|Russia*||Only a revenue action plan exists.||Yes, first developed in 1996, but very rudimentary.||No.||Legal entities have been assigned taxpayer identification numbers||No.|
|Tajikistan||No.||No.||Planned for 1999.||Scheduled for implementation for enterprise by end-1998.||No.|
|Turkmenistan||No, State Tax Service views this as a Ministry of Finance responsibility.||No.||(not clear.)||Part of 1997 planned reforms.||Very limited.|
|Ukraine*||Under development.||IMF advisor developed an audit plan; it will be applied on a pilot basis in Kiev during 1998,||Under development||Under development||Yes.|
|Uzbekistan||No.||Yes, but along traditional lines.||Yes.||Yes.||Limited.|
|Detection of nonregistered taxpayers||Detection of stopfilers||Detection of delinquent accounts||System to monitor arrears|
|Azerbaijan*||Planned.||Yes, but not universally computerized.||Yes, but not universally computerized.||Yes.|
|Belarus||No, but trying out selected methods on a trial basis.||Yes, but not universally computerized.||No.|
|Estonia||No.||Under development.||Under development.||Yes.|
|Georgia*||Yes, a systematic program is in place.||Yes, detection takes 7-14 days.||Yes.||Yes, classified by age of debt.|
|Kazakhstan*||No.||Only at pilot office.||No.||Only at pilot office.|
|Kyrgyz Republic||Under development.||Yes, but limited.||Yes, in process.||Yes, but computer system is not fully integrated.|
|Lithuania||Task force established.||In place, but not effective.||(not clear.)||Yes.|
|Moldova||No.||Yes, but limited.||Yes, but limited.||No.|
|Russia*||Tax police are responsible for this.||Partially in place, but there is no automatic printout of stopfilers.||Partially in place, but there is no automatic printout of delinquent taxpayers.||Not a high priority.|
|Tajikistan||No.||Not systematic.||Not systematic.||No,|
|Turkmenistan||(not clear.)||(not clear.)||(not clear.)||(not clear.)|
|Ukraine*||State Tax Administration does not have a systematic program; but responsibility for this activity rests with the Tax Police.||New computer systems can identify stopfilers, but measures to control them have not been developed.||New computer systems can identify delinquent accounts, but measures to control them have not been developed.||No.|
|Uzbekistan||Not systematic.||In place.||Yes.||Yes.|
Recent Occasional Papers of the International Monetary Fund
182. Tax Reform in the Baltics, Russia, and Other Countries of the Former Soviet Union, by a staff team led by Liam Ebrill and Oleh Havrylyshyn. 1999.
181. The Netherlands: Transforming a Market Economy, by C. Maxwell Watson, Bas B. Bakker, Jan Kees Martijn, and loannis Halikias. 1999.
180. Revenue Implications of Trade Liberalization, by Liam Ebrill, Janet Stotsky, and Reint Gropp. 1999.
179. Disinflation in Transition: 1993-97, by Carlo Cottarelli and Peter Doyle. 1999.
178. IMF-Supported Programs in Indonesia, Korea, and Thailand: A Preliminary Assessment, by Timothy Lane. Atish Ghosh, Javier Hamann, Steven Phillips, Marianne Schulze-Ghattas, and Tsidi Tsikata. 1999.
177. Perspectives on Regional Unemployment in Europe, by Paolo Mauro, Esawar Prasad, and Antonio Spilimbergo. 1999.
176. Back to the Future: Postwar Reconstruction and Stabilization in Lebanon, edited by Sena Eken and Thomas Helbling. 1999.
175. Macroeconomic Developments in the Baltics, Russia, and Other Countries of the Former Soviet Union, 1992-97, by Luis M. Valdivieso. 1998.
174. Impact of EMU on Selected Non-European Union Countries, by R. Feldman, K. Nashashibi, R. Nord, P. Allum, D. Desruelle, K. Enders, R. Kahn, and H. Temp ran o-Arroyo. 1998.
173. The Baltic Countries: From Economic Stabilization to EU Accession, by Julian Berengaut, Augusto Lopez-Claros, Françoise Le Gall, Dennis Jones, Richard Stern, Ann-Margret Westin, Effie Psalida, Pietro Garibaldi. 1998.
172. Capital Account Liberalization: Theoretical and Practical Aspects, by a staff team led by Barry Eichen-green and Michael Mussa, with Giovanni Dell’Ariccia, Enrica Detragiache, Gian Maria Milesi-Ferretti, and Andrew Tweedie. 1998.
171. Monetary Policy in Dollarized Economies, by Tomás Baliño. Adam Bennett, and Eduardo Borensztein. 1998.
170. The West African Economic and Monetary Union: Recent Developments and Policy Issues, by a staff team led by Ernesto Hernández-Cáta and comprising Christian A. Francois, Paul Masson, Pascal Bouvier, Patrick Peroz, Dominique Desruelle, and Athanasios Vamvakidis. 1998.
169. Financial Sector Development in Sub-Saharan African Countries, by Hassanali Mehran, Piero Ugolini, Jean Phillipe Briffaux, George Iden, Tonny Lybek, Stephen Swaray, and Peter Hayward. 1998.
168. Exit Strategies: Policy Options for Countries Seeking Greater Exchange Rate Flexibility, by a staff team led by Barry Eichengreen and Paul Masson with Hugh Bredenkamp, Barry Johnston, Javier Hamann, Esteban Jadresic, and Inci Ötker. 1998.
167. Exchange Rate Assessment: Extensions of the Macroeconomic Balance Approach, edited by Peter Isard and Hamid Faruqee. 1998
166. Hedge Funds and Financial Market Dynamics, by a staff team led by Barry Eichengreen and Donald Mathieson with Bankim Chadha, Anne Jansen, Laura Kodres, and Sunil Sharma. 1998.
165. Algeria: Stabilization and Transition to the Market, by Karim Nashashibi, Patricia Atonso-Gamo, Stefania Bazzoni, Alain Féler, Nicole Laframboise, and Sebastian Paris Horvitz. 1998.
164. MULTIMOD Mark III: The Core Dynamic and Steady-State Model, by Douglas Laxton, Peter Isard, Hamid Faruqee, Eswar Prasad, and Bart Turtelboom. 1998.
163. Egypt: Beyond Stabilization, Toward a Dynamic Market Economy, by a staff team led by Howard Handy. 1998.
162. Fiscal Policy Rules, by George Kopits and Steven Symansky. 1998.
161. The Nordic Banking Crises: Pitfalls in Financial Liberalization? by Burkhard Dress and Ceyla Pazarbaşioğlu. 1998.
160. Fiscal Reform in Low-Income Countries: Experience Under IMF-Supported Programs, by a staff team led by George T. Abed and comprising Liam Ebrill, Sanjeev Gupta, Benedict Clements, Ronald Mc-Morran, Anthony Pellechio, Jerald Schiff, and Marijn Verhoeven. 1998.
159. Hungary: Economic Policies for Sustainable Growth, Carlo Cottarelli, Thomas Krueger, Reza Moghadam. Perry Perone, Edgardo Ruggiero, and Rachel van Elkan. 1998.
158. Transparency in Government Operations, by George Kopits and Jon Craig. 1998.
157. Central Bank Reforms in the Baltics, Russia, and the Other Countries of the Former Soviet Union, by a staff team led by Malcolm Knight and comprising Susana Almuiñ John Dalton, Inci Otker, Ceyla Pazarbaşioğlu, Arne B. Petersen, Peter Quirk, Nicholas M. Roberts, Gabriel Sensenbrenner, and Jan Willem van der Vossen. 1997.
156. The ESAF at Ten Years: Economic Adjustment and Reform in Low-Income Countries, by the staff of the International Monetary Fund. 1997.
155. Fiscal Policy Issues During the Transition in Russia, by Augusto Lopez-Claros and Sergei V. Alexas-henko. 1998.
154. Credibility Without Rules? Monetary Frameworks in the Post-Bretton Woods Era, by Carlo Cottarelli and Curzio Giannini. 1997.
153. Pension Regimes and Saving, by G.A. Mackenzie, Philip Gerson, and Alfredo Cuevas. 1997.
152. Hong Kong, China: Growth, Structural Change, and Economic Stability During the Transition, by John Dodsworth and Dubravko Mihaljek. 1997.
151. Currency Board Arrangements: Issues and Experiences, by a staff team led by Tomás J.T. Balino and Charles Enoch. 1997.
150. Kuwait: From Reconstruction to Accumulation for Future Generations, by Nigel Andrew Chalk, Mohamed A. El-Erian, Susan J. Fennell, Alexei P. Kireyev, and John F. Wilson. 1997.
149. The Composition of Fiscal Adjustment and Growth: Lessons from Fiscal Reforms in Eight Economies, by G.A. Mackenzie, David W.H. Orsmond, and Philip R. Gerson. 1997.
148. Nigeria: Experience with Structural Adjustment, by Gary Moser, Scott Rogers, and Reinokl van Til. with Robin Kibuka and lnutu Lukonga. 1997.
147. Aging Populations and Public Pension Schemes, by Sheetal K. Chand and Albert Jaeger. 1996.
146. Thailand: The Road to Sustained Growth, by Kalpana Kochhar, Louis Dieks-Mireaux. Balazs Horvath. Mauro Mecagni, Erik Offerdal, and Jianping Zhou. 1996.
145. Exchange Rate Movements and Their Impact on Trade and Investment in the APEC Region, by Takatoshi Ito, Peter Isard, Steven Symansky, and Tamim Bayoumi. 1996.
144. National Bank of Poland: The Road to Indirect Instruments, by Piero Ugolini. 1996.
143. Adjustment for Growth: The African Experience, by Michael T. Hadjiinichael, Michael Nowak, Robert Sharer, and Amor Tahari. 1996.
142. Quasi-Fiscal Operations of Public Financial Institutions, by G.A. Mackenzie and Peter Stella. 1996.
141. Monetary and Exchange System Reforms in China: An Experiment in Gradualism, by Hassanali Mehran, Marc Quintyn, Tom Nordman, and Bernard Laurens. 1996.
140. Government Reform in New Zealand, by Graham C. Scott. 1996.
139. Reinvigorating Growth in Developing Countries: Lessons from Adjustment Policies in Eight Economies, by David Goldsbrough, Sharmini Coorey, Louis Dicks-Mireaux, Balazs Horvath, Kalpana Kochhar, Mauro Mecagni, Erik Offerdal, and Jianping Zhou. 1996.
138. Aftermath of the CFA Franc Devaluation, by Jean A.P. Clément, with Johannes Mueller, Stéphane Cossé, and Jean Le Dem. 1996.
137. The Lao People’s Democratic Republic: Systemic Transformation and Adjustment, edited by Ichiro Otani and Chi Do Pham. 1996.
Note: For information on the title and availability of Occasional Papers not listed, please consult the IMF Publications Catalog or contact IMF Publication Services.
Baer, Katherine, Victoria P.Summers, and Emil M.Sunley, 1996, “A Destination VAT for CIS Trade,” MOCT-MOST: Economic Policy in Transitional Economies, Vol. 6, pp. 87–106.
Casanegra de Jantscher, Milka, Carlos, Silvani, and Charles L.Vehorn, 1992, “Modernizing Tax Administration,” in Fiscal Policies in Economies in Transition, ed. by VitoTanzi(Washington:International Monetary Fund).
Chand, Sheetal K. and Henri R.Lorie, 1992, “Fiscal Policy,” in Fiscal Policies in Economies in Transition, ed. by VitoTanzi(Washington:International Monetary Fund).
Cheasty, Adrienne and Jeffrey M.Davis, 1996, “Fiscal Transition in Countries of the Former Soviet Union– An Interim Assessment,” IMF Working Paper 96/61(Washington:International Monetary Fund).
European Bank for Reconstruction and Development,1998,Transition Report(London:EBRD).
Gaddy, Clifford and Barry, Ickes, 1998, “Russia’s Virtual Economy,” Foreign Affairs, Vol. 77(September-October), pp. 53–67.
Gandhi, Ved and DubravkoMihaljek, 1992, “Scope for Reform of Socialist Tax Systems,” in Fiscal Policies in Economies in Transition, ed. by VitoTanzi(Washington:International Monetary Fund).
Havrylyshyn, Oleh, Ivailo, IzvorskiRon vanRooden, 1998, “Recovery and Growth in Transition Economies 1990-1997: A Stylized Regression Analysis,” IMF Working Paper 98/141(Washington:International Monetary Fund).
Hemming, Richard1995, “The Revenue Decline in the Baltics, Russia, and Other Countries of the Former Soviet Union,” in Policy Experiences and Issues in the Baltics, Russia, and Other Countries of the Former Soviet Union, ed. by Daniel A.Citrin, and Ashok K, Lahiri, IMF Occasional Paper No. 133(Washington:International Monetary Fund).
Lopez-Claros, Augusto, and Sergei V.Alexashenko, eds., 1998.Fiscal Policy Issues During the Transition in Russia,IMF Occasional Paper No. 155(Washington:International Monetary Fund).
Mutén, Leif1992, “Income Tax Reform,” in Fiscal Policies in Economies in Transition, ed. by VitoTanzi(Washington:International Monetary Fund).
Silvani, Carlos, and Katherine, Baer, 1997, “Designing a Tax Administration Reform Strategy: Experience and Guidelines.” IMF Working Paper 97/30(Washington:International Monetary Fund).
Silvani, Carlos and JohnBrondolo, 1996, “Administering the VAT in Countries in Transition,” paper prepared for the Fiscal Affairs Department(unpublished; Washington:International Monetary Fund).
Silvani, CarlosRichardFulford, Charles, Vehorn, and John, Brondolo, 1996, “Improving Audit Procedures in Countries in Transition,” paper prepared for the Fiscal Affairs Department(unpublished; Washington:International Monetary Fund).
Summers, Victoria P. and Emil M.Sunley, 1995, “An Analysis of Value-Added Taxes in Russia and Other Countries of the Former Soviet Union,” Tax Notes International Vol. 10(June 19), pp. 2049–72.
The Commonwealth of Independent States (CIS) includes Armenia, Azerbaijan. Belarus, Georgia, Kazakhstan, the Kyrgyz Republic, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan.
The values for 1993–94 for Tajikistan are suspect; if, however, one assumes that revenues in the early 1990s were even as low as 27 percent of GDP, that would still imply a decline of” at least 15 percentage points,
See European Bank for Reconstruction and Development (1998) for a comparison of progress in reforms.
Where civil strife occurred, the pattern is mixed, with some countries experiencing a rapid decline very early, even before 1993 in some cases (Azerbaijan, Georgia, Tajikistan), then a substantial recovery from very low levels. Armenia, in contrast, saw the greatest declines after 1994 and only a slight recovery in 1997, while Moldova’s pre-1993 decline was followed by a strong recovery as early as 1994.
Note the similarity of this conclusion with that for growth recovery—delaying reforms can minimize the output decline of transition, but the best result comes from strong reforms that lead to early recovery and sustained growth (Havrylyshyn, Izvorski, and van Rooden. 1998).
Offsets are a nontransparent mechanism in which amounts owed by the government to the private sector for acquisition of goods and services are canceled out against unpaid taxes owed by the same companies.
The Kyrgyz Republic and Russia also experienced slight declines relative to the comparable period of the year before.
See Gaddy and Ickes (1998) for a discussion of this phenomenon.
As in the case of declining revenues, a good deal of” analysis has been done elsewhere regarding the specific issues and problems encountered in moving from the “tax system” of the planned economies to a true tax system as needed in a capitalist economy, reflective of real costs and prices (e.g., Hemming, 1995; Lopez-Claros and Alexashenko, 1998; Gandhi and Mihaljek, 1992; Mutén, 1992; Tait, 1992; Summers and Sunley, 1995; and Baer, Summers, and Sunley, 1996.)
Where the tax ratio eventually stabilizes will depend on several factors, including public expenditure commitments and the capacity for revenue mobilization. In that connection, it should be noted that the average tax-to-GDP ratio of non-OECD countries is about 20 percent (this result holds both for low-and middle-income countries) in contrast to an average revenue ratio of approximately 35 percent for the Baltics, Russia, and other countries of the former Soviet Union in 1992, when declines had already begun to be experienced from the level in the Soviet Union in the mid-1980s (Cheasty and Davis, 1996).
The State Tax Services in most countries have been unable to cope with the collection of funds from entities that are not subject to regular and automatic accounting transfers to the state, and remain in most cases substantially unchanged from their pre-1992 status, as discussed in the following subsection. Conversely, though, some analysis suggest that a significant portion of the problem actually arises from the very nature of the state sector. The continued implicit support of the old state enterprise sector through misstatement of prices has meant that the nominal level of taxes assessed, though correct from a de jure, statutory perspective, may bear little relation to the true productivity of the formal economy. If true, allowing this misstatement of output (and implicit subsidization) to continue could certainly be classified as one of the political problems undermining the tax system (Gaddy and Ickes, 1998).
Major substantive legislative revisions to the various taxes have been under development and discussion for some time and have been reflected in a controversial series of drafts of a comprehensive new tax code. Movement on this front halted subsequent to the August 1998 financial crisis, but policy change is again being contemplated under the new government.
The new Tajik tax code, when implemented, will clearly move Tajikistan into a category with Georgia and Kazakhstan.
A number of previous papers have analyzed the special problems of reform of lax administration in transition economies. For additional background, see Casanegra de Jantscher, Silvani. and Vehorn (1992), Silvani and others (1996), Silvani and Brondolo (1996), and Silvani and Baer (l997).
Because of this, a thorough assessment of the most recent experience in implementing reforms has been limited to five countries: Azerbaijan, Georgia, Kazakhstan, Russia, and Ukraine.
A large taxpayer unit is a division of a tax administration that ideally is responsible for all aspects of audit, collection, and enforcement from taxpayers representing tax revenues over a certain threshold level. Relatively few such taxpayers are typically the source of a large fraction of total revenues. Experience has shown that such units can effectively increase compliance by the major taxpayers.
This problem can be attributed in part to the current assignment of taxes to different government levels, which in most countries raises potential conflicts in setting priorities for collecting national versus local taxes. In addition, the national tax administrations are often inadequately funded to carry out their work and are reliant upon regional and local governments to provide accommodation, cover office operating costs, and even pay employees’ wages. This reliance on regional authorities has greatly increased the influence of regional governors and local politicians regarding tax compliance priorities.
In Kazakhstan and Russia, although tax forms were redesigned with the assistance of tax administration advisors, they were not adopted by the authorities.
The only individual who arc generally required to he registered are those who carry on business activities. Most CIS countries, appropriately at this stage, do not require individuals for whom wages are the only source of income to register and file returns.
Under the origin principle valued added with respect to production within the country is taxed, even if exported, and imports arc not taxed. Under the destination principle, conversely, all consumption within the country is taxed—imports are included and exports are zero-rated.
In Georgia, specific taxes apply only to imported liquor; domestically produced beverages still attract tax on an ad valorem basis.
However, use of offsets at the federal level has again occurred in the latter part of 1998.