Browse
In an article in the last issue of Finance and Development Adolf J.H. Enthoven showed how accountancy has through its history continuously responded to new needs. In this article he indicates how he believes it should now respond to the requirements of the developing countries.
For the latest thinking about the international financial system, monetary policy, economic development, poverty reduction, and other critical issues, subscribe to Finance & Development (F&D). This lively quarterly magazine brings you in-depth analyses of these and other subjects by the IMF’s own staff as well as by prominent international experts. Articles are written for lay readers who want to enrich their understanding of the workings of the global economy and the policies and activities of the IMF.
IN A CONTRIBUTION to this journal, Tanzi (1983) has presented annual estimates for the underground economy in the United States in the 1930–82 period. The purpose of this comment is twofold:
For the latest thinking about the international financial system, monetary policy, economic development, poverty reduction, and other critical issues, subscribe to Finance & Development (F&D). This lively quarterly magazine brings you in-depth analyses of these and other subjects by the IMF’s own staff as well as by prominent international experts. Articles are written for lay readers who want to enrich their understanding of the workings of the global economy and the policies and activities of the IMF.
Inflation threatens to become a permanent fact in many economies. One result is that distortions arise in personal income tax systems. The author considers the desirability of schemes for automatically adjusting taxation to inflation.
Inflation affects individuals and income classes in many ways—as consumers, taxpayers, wage earners, savers, asset holders, lenders, borrowers, and so forth. Because of this multiplicity of influences, it is difficult, and perhaps impossible, to assess the total economic impact of inflation. For this reason, empirical studies have limited themselves to analyzing the impact of inflation on individuals or income classes in their roles as consumers, savers, or wage earners. This partial approach does not answer the question of whether the total impact of inflation is or is not beneficial to individuals in particular income classes, but it does provide interesting information that can be useful for policy purposes. This paper will follow this partial approach and analyze the impact of inflation on individuals in connection with the tax treatment of interest paid or received in the United States.
When the effect of high inflation on the tax system is taken into account, the overall revenues from inflationary finance may well be negative. The strength of this contention is weighed against measures taken in Israel in an attempt to construct an inflation-proof tax system. The paper concludes that, despite these measures, the Israeli experience suggests that it is more appropriate to talk about the “inflation subsidy,” rather than the “inflation tax.”
On september 27, 1986, the U.S. Congress passed the Tax Reform Act, and on October 22 the President signed the Act into law. The Tax Reform Act of 1986 (TRA) made sweeping changes in the structure of the U.S. tax system, by curbing tax preferences and by using the room thus created to lower marginal tax rates. In this way, it was hoped, incentives to work, save, and invest would he enhanced, and economic performance would be improved. In addition, the elimination of many tax preferences was expected to help equalize the tax treatment of different investments, thus raising the efficiency of investment. The TRA was designed to be neutral in its overall effect on revenue over the period 1987-91, but it would significantly alter the distribution of the tax burden: the tax burden on corporations would increase by US$120 billion over the five-year period, whereas the personal tax burden would decline correspondingly. Receipts were increased substantially in fiscal year 1987 but are expected to be lower than otherwise in fiscal years 1989-91.
The calculation of an economic rate of return has become a standard feature of project evaluation. Yet, as traditionally defined, the rate of return does not focus adequately on the scarcity of investable resources faced by developing countries, nor on their need to alleviate extreme poverty. A new approach in project analysis has therefore been developed which provides a framework designed to assist systematic decision making in this area.
The sensitivity (i.e., elasticity and built-in flexibility) of the U. S. individual income tax to changes in national income is of great interest to researchers and policymakers. However, the direct measurement of this sensitivity—that is, the measurement obtained from time-series observations of the relevant variables—has always been difficult, and even at times impossible, because changes in the legal structure of the tax have been too frequent to provide enough observations that relate to the same legal structure to allow statistically significant coefficients to be determined. This was particularly true in the United States before 1954, when the rates were changed frequently; it has also been true since 1963, when important changes occurred in rates, personal exemptions, deductions, and other features. In contrast, during the period between 1954 and 1963, hardly any significant statutory changes occurred in the tax.