This paper explores that in developing economies, sufficient tax revenue is necessary to finance spending on health care, education, and infrastructure—all of which are prerequisites for economic growth and development. However, it is not simply the revenue ratio that matters; the quality of the revenue system is also essential for delivering fair and efficient outcomes. To design a revenue system that fosters sustainable economic and social development and enjoys broad public support, it is essential for tax reform proposals to be carefully assessed, quantitatively analyzed, and openly debated. This requires that decision makers and all stakeholders in the debate have access to the best available facts, data, and independent evidence-based analysis, including about the impact of tax reforms on revenue, the income distribution, and economic performance. The central institutional actor in the decision making process—the executive—is best supported in this process by what is generally called a tax policy unit (TPU). TPUs are tasked to guide and inform the tax policy debate, based on facts, independent data analysis, and multidisciplinary efforts.
This Technical Assistance report focuses on Ukraine’s distributed profit tax, voluntary disclosure of assets, and Base Erosion and Profit Shifting Work Program implementation. The recommendations largely favor simplifying rules, improving the definition of basic concepts, eliminating potential loopholes, and adhering more closely to international standards in some cases. Thus, for the sake of simplification, the report recommends that Controlled Foreign Corporation rules should apply to the ‘first onshore’ person rather than having to trace them back to the ultimate beneficial owner in Ukraine. Also, it recommends that the proposed interest deduction limitation should eliminate the carry-forward currently permitted, limit deductions to net interest expense and exempt the financial sector from this limitation. Some key definitions can be improved too. The report suggests that if there is an urgent need to promote private investments, the accelerated depreciation tool should be applied for plant and machinery and structures housing them for say another five years.
Advance tax rulings are a common feature of mature tax systems. The tax systems of the United States, the United Kingdom, the Netherlands, Germany, Australia, and South Africa all have established ruling practices. Taxpayers can obtain an advance tax ruling in nearly all OECD member countries. Increasingly, many non-OECD countries are also offering advance tax rulings. An advance tax ruling regime seeks to promote clarity and consistency regarding the application of the tax law for both taxpayers and the tax authority. However, there are also inherent risks associated with the proliferation of granting confidential advance tax rulings which are not published or otherwise reported. This Tax Law IMF Technical Note focuses on designing an advance tax ruling regime in the nature of private tax rulings.