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Notes and Manuals > IMF Notes

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Cover IMF Notes
Fiscal Revenue Mobilization and Digitally Traded Products: Taxing at the Border or Behind It?
Tibor Hanappi, Adam Jakubik, and Michele Ruta
Digitalization has the potential to bring great economic benefits, but it is also creating new challenges. This note focuses on trade in digitized products, its fiscal revenue implications, and the appropriate role for domestic and border tax instruments in this context. As digitized trade increases, in part replacing physical trade, developing countries that rely on tariff revenue to support fiscal capacity will face the difficult question of how best to tax these new trade flows and maintain fiscal balances. This note shows that, independently of the future trajectory of trade in digitized products, broad-based nondiscriminatory value-added taxes are preferrable to tariffs both from an economic efficiency and from a revenue standpoint. These taxes are also easier to implement and administer. In this context, the World Trade Organization (WTO) moratorium on customs duties on electronic transmission can help to effectively channel developing countries’ tax reform efforts in a more efficient direction. This transition would require further investment by the global community in modernizing the tax and customs infrastructure of developing countries to adequately meet revenue needs in the digital era.
Keywords:
Digital trade; trade in services; tax policy
Cover IMF Notes
The Political Economy of GovTech
Arthur Silve and Mariano Moszoro
The digitalization of public services, known as GovTech, can disrupt traditional mechanisms to promote economic development (for example, financial inclusion, education, and health care), improve the delivery of public services, and expedite development objectives. For GovTech to be successful in enhancing the public sector's efficiency, transparency, and inclusiveness, its design and implementation require that private interests be aligned with the overarching goal of a “citizen-oriented” digitalization. Because the interests of the state and private providers are often antagonistic, the social dividends from GovTech remain contingent on implementing the appropriate market structure through adequate property rights and regulatory oversight.
Keywords:
GovTech; citizen-oriented digitalization; modernization; accountability; personal data; private providers; market power
Cover IMF Notes
Global Food Crisis Update: Recent Developments, Outlook, and IMF Engagement
Mr. Bjoern Rother, Mr. Sebastian Sosa, Majdi Debbich, Chiara Castrovillari, and Ervin Prifti
The global food crisis remains a major challenge. Food insecurity fueled by widely experienced increases in the cost of living has become a growing concern especially in low-income countries, even if price pressures on global food markets have softened somewhat since the onset of Russia’s war in Ukraine in February 2022. Targeted assistance to the most vulnerable households combined with policy measures to support trade and agriculture systems, including to better cope with climate shocks, can help countries withstand the fallout of the ongoing food crisis while building longer-term resilience. The IMF, working in close cooperation with other international organizations, has continued to contribute to international efforts to alleviate food insecurity by providing policy advice, capacity development, and financial support through Upper Credit Tranche Arrangements and the new Food Shock Window. New commitments to countries particularly affected by the global food crisis total $13.2 billion since February 2022, of which $3.7 billion has been disbursed as of March 2023.
Keywords:
Food insecurity; Russia’s war in Ukraine; global inflation; terms of trade shock; international cooperation; open trade; vulnerable households; agricultural production; IMF lending; IMF policy advice; capacity development
Cover IMF Notes
Internet Adoption Trends during COVID-19
David Amaglobeli, Mengfei Gu, Mariano Moszoro, Yue Zhou, and Patricia L Escalante
This paper examines the common perception that internet adoption accelerated globally during the COVID-19 pandemic. The data show little evidence of a faster expansion of access to internet (extensive margin) across all country income groups but strong evidence of acceleration in the improvement in the quality of connectivity (intensive margin). The data also support that, despite a decline in internet prices over the past decade, affordability of digital services remains a concern for low-income developing countries.
Keywords:
Internet; digitalization; COVID-19
Cover IMF Notes
Tackling the Global Food Crisis: Impact, Policy Response, and the Role of the IMF
Mr. Bjoern Rother, Mr. Sebastian Sosa, Mr. Daehaeng Kim, Mr. Lukas P Kohler, Ms. Gaelle Pierre, Naoya Kato, Majdi Debbich, Chiara Castrovillari, Khamza Sharifzoda, Ms. Elizabeth Van Heuvelen, Fabiana Machado, Celine Thevenot, Ms. Pritha Mitra, and Dominique Fayad
Russia’s war in Ukraine has exacerbated food insecurity that had already been on the rise for half a decade. Low-income countries are affected the most. This note suggests that the food and fertilizer price shock would add $9 billion in 2022 and 2023 to the import bills of the 48 most affected countries. The budgetary cost of protecting vulnerable households in these countries amounts to $5–7 billion. Strong and timely action on a global scale is needed to support vulnerable households through international humanitarian assistance and domestic fiscal measures; to maintain open trade; to enhance food production and distribution; and to invest in climate-resilient agriculture. The IMF has been stepping up its engagement to help tackle the global food crisis, working closely with partners, by providing policy advice, capacity building and financing. IMF financing is a third line of defense in meeting external financing needs associated with the global food shock, which should ideally be covered by donor grants and concessional borrowing from MDBs. A new food shock window under the emergency financing instruments is expected to be approved soon to further strengthen its lending response to the food crisis.
Keywords:
Food insecurity; Russia’s war in Ukraine; global inflation; terms of trade shock; international cooperation; open trade; vulnerable households; agricultural production; IMF lending; IMF policy advice; capacity development
Cover IMF Notes
Policies to Address the Refugee Crisis in Europe Related to Russia’s Invasion of Ukraine
Nicolo Bird and Mr. David Amaglobeli
Refugees from Ukraine face multiple vulnerabilities, with many requiring humanitarian assistance to meet basic needs. In response to Russia’s invasion of Ukraine, host countries in Europe and beyond have adopted measures to support refugees, including residency rights, free movement across countries, access to labor markets and integration policies, health and education services, housing options, banking services, and social protection systems. Drawing on previous IMF work on the economic challenges of refugees, this note provides an overview of policy responses needed to provide effective support to refugees fleeing Ukraine.
Keywords:
Refugee crisis; humanitarian assistance; migration; Ukraine; Europe; fiscal policy; social spending; education; health; active labor market policies; housing; social protection
Cover IMF Notes
Taxing Windfall Profits in the Energy Sector
Mr. Thomas Baunsgaard and Nate Vernon
The surge in fossil fuel prices in 2022 has generated substantial windfall profits in the energy sector. Policymakers in many countries are exploring policies to tax part of these profits. Excess profits can be taxed by tax instruments targeted at economic rents that avoid discouraging investment and limit any impact on further price increases. Many fossil fuel producing countries already have an adequate rent-capturing fiscal instrument in place. Others may consider introducing a permanent tax on windfall profits from fossil fuel extraction but should be more cautious about temporary and possibly poorly designed windfall profit taxes. Given the importance of encouraging decarbonatization of energy generation, it seems counter-intuitive to introduce exceptional tax measures on renewable electricity generation.
Keywords:
natural resource taxation; extractive industries; progressivity; windfall taxation; economic rents
Cover IMF Notes
Fiscal Policy for Mitigating the Social Impact of High Energy and Food Prices
Mr. David Amaglobeli, Emine Hanedar, Mr. Gee Hee Hong, and Celine Thevenot
Fiscal policy has a crucial role in lessening the impact on the most vulnerable households. Governments must balance by ensuring access to energy and food, normalizing fiscal policy after unprecedented support in 2020, and promoting green transformation.
Keywords:
Inflation; Food prices; Energy prices; Subsidies; Cash transfers; Social assistance; Energy reform; Food Security; Taxation; Fiscal policy