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Business and Economics > Corporate Taxation

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Cover IMF Staff Country Reports
Republic of Nauru: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Nauru
International Monetary Fund. Asia and Pacific Dept
This 2019 Article IV Consultation with Republic of Nauru highlights that it remains vulnerable to climate change and has a narrow economic base and limited capacity. Development challenges are increased by unavailability of land and high incidence of noncommunicable diseases. Growth was stronger than expected in FY2018 but slowed in FY2019. The outlook is subdued, with growth expected to reach 2 percent in the medium term. Revenues are projected to decline, necessitating a fiscal adjustment. Risks are skewed to the downside and include the scaling down of Regional Processing Centre activity and revenues, volatile fishing revenues, climate change, and delays in fiscal and structural reforms. Fiscal adjustment is required to avoid a breach of the fiscal anchor, contain debt, and maintain the Trust Fund contributions. New sources of economic growth and income are needed to support Nauru’s development agenda. Policies should be implemented in the near term to support private sector activity, including through financial sector development, state-owned enterprises reform, and land rehabilitation. The effectiveness of education and health spending needs to be improved to meet development goals.
Keywords:
ISCR; CR; Nauru; windfall revenue; PFTAC TA; revenue gain; authority; GFS reporting; development agenda; staff advice; Extra-budgetary funds; Budget planning and preparation; Government cash forecasting; Pacific Islands; Global
Cover IMF Working Papers
A Partial Race to the Bottom: Corporate Tax Developments in Emerging and Developing Economies
Junhyung Park
,
Mr. Sukhmani Bedi
,
S. M. Ali Abbas
, and
Mr. Alexander D Klemm
This paper assembles a new dataset on corporate income tax regimes in 50 emerging and developing economies over 1996-2007 and analyzes their impact on corporate tax revenues and domestic and foreign investment. It computes effective tax rates to take account of complicated special regimes, such as partial tax holidays, temporarily reduced rates and increased investment allowances. There is evidence of a partial race to the bottom: countries have been under pressure to lower tax rates in order to lure and boost investment. In the case of standard tax systems (i.e. tax rules applying under normal circumstances), the effective tax rate reductions have not been larger than those witnessed in advanced economies, and revenues have held up well over the sample period. However, a race to the bottom is evident among special regimes, most notably in the case of Africa, creating effectively a parallel tax system where rates have fallen to almost zero. Regression analysis reveals higher tax rates adversely affect domestic investment and FDI, but do raise revenues in the short-run.
Keywords:
WP; tax rate; revenue; GDP; investment; Effective Tax Rates; Corporate Income Tax; Special Economic Zones; Emerging Markets; Low-Income Countries; Developing Economies; investment impact; tax rate cut; regime data; economic rent; tax competition; present discounted value; capital tax elasticity; lowering tax rates; corporate tax; Effective tax rate; Average effective tax rate; Marginal effective tax rate; Africa; Europe; Sub-Saharan Africa; Global