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Business and Economics > Corporate Taxation

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Cover Staff Discussion Notes
Broadening the Gains from Generative AI: The Role of Fiscal Policies
Fernanda Brollo
,
Era Dabla-Norris
,
Ruud de Mooij
,
Daniel Garcia-Macia
,
Tibor Hanappi
,
Li Liu
, and
Anh D. M. Nguyen
Generative artificial intelligence (gen AI) holds immense potential to boost productivity growth and advance public service delivery, but it also raises profound concerns about massive labor disruptions and rising inequality. This note discusses how fiscal policies can be employed to steer the technology and its deployment in ways that serve humanity best while cushioning the negative labor market and distributional effects to broaden the gains. Given the vast uncertainty about the nature, impact, and speed of developments in gen AI, governments should take an agile approach that prepares them for both business as usual and highly disruptive scenarios.
Keywords:
Artificial intelligence; AI; technological change; labor market; fiscal policy; social protection systems; tax systems; IMF Staff Discussion Note SDN2024/002; gen AI; advance public service delivery; role of fiscal policies; replacement ratio; job displacement; income support; tax treatment; market power; Labor markets; Corporate income tax; Automation; Capital income; Global
Cover IMF Working Papers
A Firm Lower Bound: Characteristics and Impact of Corporate Minimum Taxation
Aqib Aslam
and
Maria Delgado Coelho
This paper examines the role of minimum taxes and attempts to quantify their impact on economic activity. Minimum taxes can be effective at shoring up the corporate tax base and enhancing the perceived equity of the tax system, potentially motivating broader taxpayer compliance. Where political and administrative constraints prevent reforms to the standard corporate income tax, a minimum tax can help mitigate base erosion from excessive tax incentives and avoidance. Using a new panel dataset that catalogues changes in minimum tax regimes over time around the world, firm-level analysis suggests that the introduction or reform of a minimum tax is associated with an increase in the average effective tax rate of just over 1.5 percentage points with respect to turnover and of around 10 percent with respect to operating income. Minimum taxes based on modified corporate income lead to the largest increases in effective tax rates, followed by those based on assets and turnover.
Keywords:
firm Lower Bound; MT reform; minimum tax; level data; profit margins; Corporate income tax; Income; Effective tax rate; Income tax systems; Average effective tax rate; Global
Cover Corporate Income Taxes under Pressure
Corporate Income Taxes under Pressure
Why Reform Is Needed and How It Could Be Designed
Ruud A. de Mooij
,
Mr. Alexander D Klemm
, and
Ms. Victoria J Perry

Abstract

The book describes the difficulties of the current international corporate income tax system. It starts by describing its origins and how changes, such as the development of multinational enterprises and digitalization have created fundamental problems, not foreseen at its inception. These include tax competition—as governments try to attract tax bases through low tax rates or incentives, and profit shifting, as companies avoid tax by reporting profits in jurisdictions with lower tax rates. The book then discusses solutions, including both evolutionary changes to the current system and fundamental reform options. It covers both reform efforts already under way, for example under the Inclusive Framework at the OECD, and potential radical reform ideas developed by academics.

Keywords:
Profit shifting; tax competition; tax avoidance; international cooperation; tax reform; multinationals; digitalization; multinational enterprise; tax treaty; passive income; Corporate income tax; Double taxation; Income; Foreign direct investment; Corporate taxes; Global; Sub-Saharan Africa; Europe
Cover IMF Staff Country Reports
Peru: Selected Issues
International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper evaluates features of the Peruvian tax system that may have contributed to weak revenue growth, as well as reforms to strengthen the tax system. Using data on domestic tax collection in conjunction with cross-country data on tax rates, collection and tax expenditures, we attempt to shed light on the factors that distinguish tax revenue mobilization in Peru from other countries in the region. The paper also discusses recent reforms in tax policy and tax administration, and present advice for continued progress in these areas. Elimination of multiple tax regimes for small businesses can provide a boost to revenues from corporate taxes. An IMF technical evaluation of the small business tax regimes finds that a rationalization of the two existing regimes into one with the same marginal rate as the general regime will result in revenue gains of around 0.14 percent of GDP. There is ample room to increase the contribution of excises and property taxes to overall tax revenues. Relative to the regional average, Peru will continue to lag peer economies even if the current reform performs at full potential. This suggests room for further policy reforms to bring excise taxes in line with the levels of comparable economies.
Keywords:
ISCR; CR; Peru; rate; policy rate gap; dollarization; inflation targeting framework; policy instrument; Policy rate decision; transmission mechanism; monetary policy rate; macro-prudential policies; Central bank policy rate; Reserve requirements; Real exchange rates; Value-added tax; Global; Caribbean; Asia and Pacific; output gap; Policy rate; price boom
Cover IMF Staff Country Reports
Indonesia: Selected Issues
International Monetary Fund. Asia and Pacific Dept
This Selected Issues paper provides an overview of the exchange rate and trade dynamics in Indonesia. Using data on monthly export and import price and volume at the sectoral level, the paper estimates pass-through effects of exchange rate changes to trade price and volume. Results indicate adjustment frictions that depend on the source of the exchange rate fluctuation and the degree of integration in global value chains. Overall, combining price and volume effects, we find that 10 percent depreciation in the exchange rate is associated with a rise in the goods net-exports of up to 1.6 percent of GDP. Results indicate that there is considerable asymmetry and sectoral heterogeneity in the pass-throughs of exchange rate on import and export prices. Import prices adjust well to exchange rate fluctuations with the effects being stronger for appreciation episodes. The price sensitivity of export prices to exchange rate shocks is generally lower than of imports and concentrated over shorter horizons and during episodes of depreciation. The price and quantity results imply that exchange rate changes can have significant effects on the current account, by affecting movements in net-exports of goods.
Keywords:
ISCR; CR; rate; price; market; pass-through; monetary policy report; market rate; monetary policy press releases; monetary policy decision; pass-through coefficient; upside risk; Exchange rates; Corporate income tax; Tax administration core functions; Value-added tax; Medium term revenue strategy; Global
Cover IMF Working Papers
Macroeconomic Effects of Tax Rate and Base Changes: Evidence from Fiscal Consolidations
Ms. Era Dabla-Norris
and
Frederico Lima
This paper examines the macroeconomic effects of tax changes during fiscal consolidations. We build a new narrative dataset of tax changes during fiscal consolidation years, containing detailed information on the expected revenue impact, motivation, and announcement and implementation dates of nearly 2,500 tax measures across 10 OECD countries. We analyze the macroeconomic impact of tax changes, distinguishing between tax rate and tax base changes, and further separating between changes in personal income, corporate income, and value added tax. Our results suggest that base broadening during fiscal consolidations leads to smaller output and employment declines compared to rate hikes, even when distinguishing between tax types.
Keywords:
tax base; tax rate; narrative dataset; tax multipliers; tax shock; estimated tax; tax measure; tax multiplier; debt ratio; Personal income tax; Corporate income tax; Value-added tax; Southern Europe; Global
Cover IMF Staff Country Reports
Switzerland: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper analyzes key features of corporate taxation in Switzerland. The Swiss corporate tax system includes many aspects of a territorial regime; is highly attractive for multinational companies; and collects non-negligible revenues, but the status quo is not sustainable. The proposed reform would eliminate differences in the tax treatment of foreign and Swiss sourced income. Further, cantons are expected to lower their corporate income tax (CIT) rates, bringing the combined (municipal, cantonal, and federal) tax rate (averaged across cantons) to about 13.9 percent. Costs of lowering the CIT rates would be unequally distributed across cantons, and would be costlier for cantons with a large immobile CIT base.
Keywords:
ISCR; CR; rate; exchange rate; Exchange market pressure; interest rate; aggregate mortgage lending; CIT rate; mortgage interest rates; interest rate differential; exemption threshold; Corporate income tax; Exchange rates; Personal income; Mortgages; Income and capital gains taxes; Global; Eastern Europe; Europe
Cover IMF Staff Country Reports
Switzerland: 2018 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Switzerland
International Monetary Fund. European Dept.
This 2018 Article IV Consultation highlights that the Swiss economy has adjusted to the large cumulative exchange rate appreciation that took place since the global financial crisis. After a subdued start to 2017, GDP growth accelerated to 1.1 percent in 2017, and the positive momentum continued in Q1:2018, although at a slightly reduced pace. The improved external outlook, together with the depreciation since mid-2017, are expected to energize the economy and lift GDP growth to 2.25 percent in 2018, before it gradually moderates to 1.75 percent over the medium term. Inflation is expected to increase to the upper half of the target band in 2018–19, and to subsequently revert to the mid-point.
Keywords:
ISCR; CR; economy; General government debt; authority; safe-haven appreciation pressure; debt brake rule; affordability risk; headline inflation; liability positions vis-à-vis nonresident; Income; Mortgages; Corporate income tax; Inflation; Exchange rates; Global
Cover IMF Staff Country Reports
Kyrgyz Republic: Selected Issues
International Monetary Fund. Middle East and Central Asia Dept.
In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.
Keywords:
ISCR; CR; Kyrgyzstan; Kyrgyz government; SDB law; business environment; rate
Cover IMF Staff Country Reports
Kyrgyz Republic: Selected Issues
International Monetary Fund. Middle East and Central Asia Dept.
The government of the Kyrgyz Republic is determined to consolidate its finances over the coming years. This note describes the main elements of the tax regime in the Kyrgyz Republic, looks into tax incentives, and provides some reform options to raise revenues. The second note is on monetary policy in the Kyrgyz Republic, which faces challenges with respect to formulation and efficacy given the low monetization, the shallow financial system, high dollarization, and a predominantly cash-based economy.
Keywords:
ISCR; CR; Kyrgyzstan; Kyrgyz government; SDB law; business environment; rate; governance indicators in the Kyrgyz Republic; funding mechanism; Tax incentives; Exchange rate flexibility; Value-added tax; Corporate income tax; Global