Esther C. Suss, Oral H. Williams, and Mr. Chandima Mendis
The paper reviews the development of offshore financial activities in the English-speaking Caribbean islands and takes stock of the size and status of these sectors today. In view of the heightened concerns of the international community about money laundering, the costs and risks to countries of having or establishing offshore sectors have risen considerably.
Jihad Alwazir, Mr. Fazurin Jamaludin, Dongyeol Lee, Niamh Sheridan, Ms. Patrizia Tumbarello, Odd Per Brekk, and Mr. Aditya Narain
Access to financial services in the small states of the Pacific is being eroded. Weaknesses in Anti-Money Laundering and Combating the Financing of Terrorism compliance in the context of high levels of remittances are contributing to banks’ decisions to withdraw corresponding banking relationships and close bank accounts of money transfer operators. In this paper, we gather evidence on these developments in the small states of the Pacific, discuss the main drivers, and the potentially negative impact on the financial sector and macroeconomy. We then identify the collective efforts needed to address the consequences of withdrawal of corresponding banking relationships and outline policy measures to help the affected countries mitigate the impact.
This paper assesses countries' compliance with the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) international standard during the period 2004 to 2011. We find that overall compliance is low; there is an adverse impact on financial transparency created by the cumulative effects of poor implementation of standards on customer identification; and the current measurements of compliance do not take into account an analysis of ML/FT risk, thereby undermining their credibility and the relevance of some of the policy recommendations taken on their basis. Moreover, we also examine the key role of some cultural, institutional, and financial factors in boosting countries' compliance using econometric analysis.
Ernesto Crivelli, Ruud A. de Mooij, J. E. J. De Vrijer, Mr. Shafik Hebous, and Mr. Alexander D Klemm
This paper aims to contribute to the European policy debate on corporate income tax reform in three ways. First, it takes a step back to review the performance of the CIT in Europe over the past several decades and the important role played by MNEs in European economies. Second, it analyses corporate tax spillovers in Europe with a focus on the channels and magnitudes of both profit shifting and CIT competition. Third, the paper examines the progress made in European CIT coordination and discusses reforms to strengthen the harmonization of corporate tax policies, in order to effectively reduce both tax competition and profit shifting.
Mr. Christopher J. Jarvis, Ms. Gaelle Pierre, Mr. Benedicte Baduel, Dominique Fayad, Alexander de Keyserling, Mr. Babacar Sarr, and Mariusz A. Sumlinski
This IMF Departmental Paper presents the key areas in which countries of the Middle East, North Africa, and the Caucasus and Central Asia (MECA) can enhance governance and fight corruption to achieve their economic policy goals. It draws on advances that have already taken hold in the region.
A well-designed regional tax treaty to which developing countries are signatories will include provisions securing minimum withholding taxes on investment income and technical service fees, a taxing right in respect of capital gains from indirect offshore transfers, and guarding against-treaty shopping. A tax treaty policy framework—national or regional—that specifies the main policy outcomes to be achieved before negotiations commence would enable developing countries with more limited expertise and lower capacity for tax treaty negotiations to avoid concluding problematic tax treaties. This note provides guidance for members of regional economic communities in the developing world on what should and should not be included in a regional tax treaty and how to design on a common tax treaty policy framework for use in negotiations of bilateral tax treaties with nonmembers.
International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper analyzes the spillover effects of key external shocks on Paraguay. It presents an overview of Paraguay’s major economic and financial linkages with the rest world, and quantifies the spillover effects of key external factors on the Paraguayan economy, using a vector autoregression approach. The empirical results suggest that global shocks have a significant impact on Paraguay’s growth rate. The paper also highlights that output and exchange rate shocks stemming from Brazil and Argentina are also important, even after controlling for global factors.
Gongpil Choi, Federico Ortega, and Mr. Manmohan Singh
What are the constraints that have stalled EMs efforts to reuse their securities in international financial centers? We discuss the economics of collateral re-use and the present institutional structure in Asian and Latin American countries. Our empirical investigation suggests pledgeability enhances financial stability and reduces dollar funding risk. We also explain the Eurozone collateral pool to incentivize EMs, and why many securities (e.g., BTPs, Italy) are acceptable in London but not EM securities. Looking forward, EMs liaison with International Central Securities Depositories (ICSDs), and global banks’ balance sheet capacity to intermediate cross-border collateral will be crucial for this market to develop.
Nazim Belhocine, Mr. Daniel Garcia-Macia, and José Garrido
The modernization of Italy’s insolvency framework has been the subject of much interest in recent
years, related not least to its role in potentially facilitating an efficient allocation of resources. A
unique feature of Italy’s insolvency framework is a special regime for large enterprises known as
“extraordinary administration”. This paper evaluates the merits of this special regime by assessing
its efficacy and success in achieving its stated goals and comparing its features to international
standards and best practices. It finds that the special regime tends to impose large costs on
creditors and the state. The regime results, in most cases, in the sale of parts of the group, followed
by a liquidation phase of the remaining assets which can take longer than the general regime,
hindering legal certainty for creditors and more generally economic efficiency, investment and job
creation. Based on international best practices and experience, consideration should be given to
folding the special regime into the general insolvency regime, possibly with provisions to allow for
state intervention in specific well-defined circumstances.
Leandro Medina, Mr. Andrew W Jonelis, and Mehmet Cangul
The multiple indicator-multiple cause (MIMIC) method is a well-established tool for measuring informal economic activity. However, it has been criticized because GDP is used both as a cause and indicator variable. To address this issue, this paper applies for the first time the light intensity approach (instead of GDP). It also uses the Predictive Mean Matching (PMM) method to estimate the size of the informal economy for Sub-Saharan African countries over 24 years. Results suggest that informal economy in Sub-Saharan Africa remains among the largest in the world, although this share has been very gradually declining. It also finds significant heterogeneity, with informality ranging from a low of 20 to 25 percent in Mauritius, South Africa and Namibia to a high of 50 to 65 percent in Benin, Tanzania and Nigeria.