A key feature of the reform of the international financial architecture since the mid-1990s has been the development of international standards and codes.2 The data standards initiative, on which the IMF took the lead, broke new ground. The dissemination standards put in place as the centerpiece of this initiative continue to be among the most widely known of the international standards and codes.
Recognition of the importance of data transparency—including for promoting the efficient operation of financial markets and policy accountability on the part of governments and central banks—is a remarkably recent phenomenon in the history of economic thought. The timely availability of data on international reserves and the foreign exchange operations of central banks is a case in point. As recently as 10 years ago, with relatively few exceptions, only very aggregated information typically was available, and then often only with a substantial lag. Indeed, in a number of countries, these data were treated as state secrets. Moreover, significant regional differences existed—and still do, to an important degree—in terms of views about the value of enhancing transparency.
Although the name of the General Data Dissemination System (GDDS) infers that its central focus is dissemination, in its initial stages the GDDS emphasized the development of national systems in an explicit medium-term framework. Attention to data dissemination came only at a later stage. Indeed, participating countries are not required to make any formal commitments regarding data dissemination. The main premise underlying the GDDS is to give high priority to improvements in data quality, which may need to precede improvement in dissemination practice.
The financial crises of the 1990s revealed a need for the dissemination of more comprehensive data on foreign currency liquidity positions to help prevent similar crises. In 1998, the IMF began working on initiatives in this area in collaboration with working groups of the Group of Ten (G-10) and the Group of 22 (G-22). The resulting international reserves and foreign currency liquidity data template (reserves template) became a prescribed element of the IMF’s Special Data Dissemination Standard (SDDS). Data reporting under this initiative began in June 1999, and after a short transition period, SDDS subscribers were required to observe the standard as of April 2000.
Mr. William E. Alexander, Mr. John Cady, and Mr. Jesus R Gonzalez-Garcia
In its first 10 years, the IMF’s Data Dissemination Initiative has had a demonstrable positive impact on data dissemination. Currently, the General Data Dissemination System (GDDS) and the Special Data Dissemination Standard (SDDS) taken together include 83 percent of the IMF’s member countries. This initiative has become an integral part of the international financial architecture and has helped to promote economic transparency and efficiency. Along with other financial standards and codes it has served to strengthen transparency and good governance globally.
Ruud de Mooij, Mr. Alexander D Klemm, and Ms. Victoria J Perry
In recent years, newspaper headlines have featured terms such as “digital service taxes,” “paradise papers,” and “tax wars,” all referring to various issues in international taxation. These and related topics have long been discussed among tax experts from academia, businesses and policy circles. Recently, increased strains on government budgets after the global financial crisis and information that journalists have revealed about the very low global taxation of some large and profitable multinational corporations have triggered political and popular upheaval going far beyond the small group of tax insiders.
Technology is being harnessed to redefine traditional business models and provide new ways for buyers and sellers to interact both locally and globally. The result has been the emergence of a handful of firms—the so-called tech giants—that are capitalizing on first mover advantages and network externalities to boost profitability, capture market share, and turn themselves into the world’s most highly valued companies. They have inevitably captured the attention of policymakers, and in the realm of international taxation, the debate has coalesced around a number of issues that are driving the debate over whether and how countries should be able to tax the returns to highly digitalized multinational businesses (IMF 2014, 2019). More generally, an increasing number of firms are digitaliz-ing, leading to several issues that raise or intensify challenges for the international tax system.
Source-based taxation lies at the heart of the current international tax architecture (see Chapter 3), and its importance has further risen with the abolition of worldwide taxation of active business income by essentially all of the major capital exporting economies, including now the United States, the United Kingdom, and Japan.1 Notwithstanding its importance, defining the source of income is increasingly problematic, as discussed in Chapter 5. It has been made more difficult by the increasing importance of intrafirm cross-border trade and complex production chains, the increasing contribution of hard-to-value and easily mobile intangible assets to value added, and the increasing digitalization of the economy—and this increasing digitalization means that the old idea of physical presence as the main criterion for source is outmoded (see Chapter 10).
Kiyoshi Nakayama, Ms. Victoria J Perry, and Mr. Alexander D Klemm
The world is in a state of fairly deep confusion regarding whether the international tax system is to be moved toward or away from residence-based corporate taxation. Chapter 7 outlined the parameters of that confusion and described the historical and recent steps that have been taken to strengthen the application of the residence basis; these steps have included combatting both the erosion of the tax base and the practice of shifting taxable profits. This chapter explores ways in which those efforts could be, and are being, strengthened still further. Yet, at the same time, as also described in Chapter 7, most advanced economies—the primary capital exporters—have now moved away from worldwide taxation toward territorial systems that in theory tax active business income at the source only, by one mechanism or another, largely for reasons of tax competition.