When the top personal tax rates are above the corporate rate, high income individuals have an incentive to reclassify their earnings as corporate rather than personal income for tax purposes. At least U.S. tax law imposes strict limits on the extent to which employees in publicly traded corporations can engage in such income shifting. However, entrepreneurs setting up new firms can easily reclassify their income for tax purposes. This tax incentive therefore favors entrepreneurial activity. In the United States, these tax incentives were huge during the 1950s and 1960s, though they have been much smaller since then.
This paper examines the role and impact of taxation on sustainable forest management. It is shown that fiscal instruments neither reinforce nor substitute for traditional regulatory approaches and can actually undermine sustainability. The paper uses the reasoning at the root of the Faustmann solution to draw conclusions on the incentives for sustainable tropical forest exploitation. It proposes a bond mechanism as an alternative market-based instrument to encourage sustainable forest logging while reducing monitoring costs.
This paper reviews trends in GDP and other macroeconomic variables since independence. It assesses the performance of the different sectors of the economy and expenditure categories. The paper identifies a number of products that could contribute to maintaining the high growth rate that nontraditional exports have experienced. The medium-term fiscal sustainability analysis provides a useful quantification of the impact of the shocks experienced on fiscal performance. Ghana's social insurance system, stock exchange, divestiture program, rural finance, and poverty are also discussed.
Mr. Benjamin L Hunt, Mr. Robert Tchaidze, and Ann-Margret Westin (all EUR)
This Selected Issues paper for Iceland reports that it faces a considerably less favorable inflation-output variability trade-off than do Canada or the United States. A number of measures should be considered that could help minimize the cost of inflation breaching the tolerance band and help to lower the probability of such events occurring. To effectively target inflation, central banks need to be forward looking, responding early to prospective demand pressures. Having housing prices explicitly in the target ensures that the central bank will monitor developments in the housing market closely.
This Selected Issues paper focuses on various aspects of corporate debt in France. The increase in debt has financed real investments, as well as acquisition of financial assets and extension of intercompany loans. The increase in debt (and its level) appears less worrisome when debt is consolidated among nonfinancial corporations. Despite the increase in the stock of debt, debt service has increased moderately. A cross-country regression analysis reveals that French publicly listed firms are on average not more indebted and have not increased their debt more than peers in other countries, after controlling for firm and sector characteristics as well as common time effects. However, the increase in debt is concentrated among large firms with sizeable leverage in a few industries, raising questions about these firms’ ability to service this debt when interest rates rise. Stress test scenarios of a large and sudden increase in interest rates suggest that corporate debt at risk could be significant at a macroeconomic level, but that cash buffers would mitigate the impact of the shock on debt service.
International Monetary Fund. External Relations Dept.
IMF and low-income countries; De Rato in Tokyo; U.K. poverty initiative; Palau, Lithuania, Ethiopia, Kuwait; Volatility in Latin America; U.S. home equity withdrawal; Botswana: avoiding the resource curse; India: tax reform; U.S corporate cash balances.
This Selected Issues paper analyzes the underlying factors that explain the behavior of the Kiwi dollar. The findings suggest that the factors influencing the New Zealand dollar have been changing. The paper discusses that as New Zealand has become more integrated in global capital markets over time, the Kiwi dollar has become less of a commodity currency and more of a global currency that is influenced by interest rate spreads and global risk factors. The paper also looks at the strong preference for housing over financial assets exhibited by New Zealand households.
This Selected Issues and Statistical Appendix paper presents an assessment of Nigeria’s past economic reform efforts—in particular the program supported by the 2000–01 Stand-By Arrangement (SBA). The paper also reviews weaknesses in the current fiscal management framework in Nigeria and proposes reforms to further strengthen the budget process. It describes weaknesses in the current public debt management framework and the government’s reform strategy. It highlights the reform implication and addresses further actions that will be needed to put the government’s domestic debt reform strategy on a solid foundation.
This article investigates empirically the relationship between ownership concentration and performance in 376 partially and fully privatized Ukrainian enterprises. It finds that ownership concentration is positively associated with enterprise performance in Ukraine. The article also finds that concentration of ownership by foreign companies and banks is associated with better performance than ownership concentrated by the domestic owners. Ownership by Ukrainian investment funds and holding companies does not have a positive effect on performance. The article documents that, in contrast to predictions by many observers of early transition, privatization methods determined the long-term ownership structure of privatized firms.