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Business and Economics > Corporate Taxation

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  • Type: Journal Issue x
  • IMF Staff Position Notes x
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Cover IMF Staff Position Notes
Long-Term Trends in Public Finances in the G-7 Economies
Ms. Andrea Schaechter
and
Mr. Carlo Cottarelli
Today’s record public debt levels in most advanced economies are not only a direct fall-out from the global crisis. Public debt had ratcheted up over many decades before, when it had been used, in most of the G-7 countries, as the ultimate shock absorber—rising in bad times but not declining much in good times. Alongside, primary spending increased, particularly during 1965–85, reflecting predominantly a surge in health care and pension spending. Looking ahead, advanced economies will face the formidable challenge of reducing debt ratios at a time when ageing-related spending, in particular often underestimated pressures from health care systems, will put additional pressure on public finances. Addressing these fiscal challenges will require growth-friendly structural reforms, a fiscal strategy involving gradual but steady fiscal adjustment, stronger fiscal institutions, expenditure and revenue reforms, and an appropriate degree of burden sharing across all stakeholders.
Keywords:
SPN; country; debt ratio; debt; GDP; G-7; interest rate; government debt ratios; country difference; IMF staff estimate; government expenditure; baseline debt projection; public debt debt ratio; Health care spending; Social security contributions; Corporate income tax; Europe; Global
Cover IMF Staff Position Notes
Fiscal Multipliers
Mr. Antonio Spilimbergo
,
Mr. Martin Schindler
, and
Mr. Steven A. Symansky
This paper provides background information for policymakers on fiscal multipliers, including quantitative estimates. The fiscal multiplier is the ratio of a change in output to an exogenous change in the fiscal deficit with respect to their respective baselines. The size of the multiplier is larger if: leakages are few; the monetary conditions are accommodative; and the country’s fiscal position after the stimulus is sustainable. Fiscal expansions can be contractionary if they decrease consumers’ and investors’ confidence, especially if the fiscal expansion raises, or reinforces, fiscal sustainability concerns. Fiscal multipliers have been calculated for some countries but should be carefully re-examined considering the current events. The degree of financial market development has an ambiguous effect on multipliers, depending on how the degree of financial development affects liquidity constraints, and the government’s ability to finance the fiscal deficit. The past research on multiplier estimates can provide guidance in developing multiplier estimates, but judgment, based on current conditions, is important.
Keywords:
SPN; tax rebate; interest rate; multiplier; Taylor interest rate rule; monetary policy indicator; interest rate response; multiplier estimate; IMF staff note; Fiscal multipliers; Tax refunds; Corporate income tax; Fiscal stimulus; Income and capital gains taxes; Global