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Business and Economics > Corporate Taxation

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Cover IMF Staff Country Reports
Ireland: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper provides an international perspective to the authorities’ two recent policy measures: setting up new savings and counter cyclical and climate infrastructure funds and reforming the judicial review of planning decisions in Ireland. The first essay presents international best practices in the design and operation of sovereign wealth funds that could inform the setup of the two new funds in Ireland. It highlights the importance of operating the funds within a strong fiscal policy framework. The second essay reviews Ireland’s planning and permitting system, underscoring the key elements that have hindered public investment. It also looks into the government’s proposed Bill to reform the planning system and contrasts its key features with those of other international jurisdictions. It finds that several issues may contribute to the inefficiencies in the planning and judicial review system, such as the loose standing requirements and lack of mandatory timelines related to judicial review, as well as institutional governance issues within the planning board, which the newly proposed reforms and legislative measures seek to address.
Keywords:
housing affordability; D. policy option; savings fund; modernizing judicial review; impulse response; Housing; Housing prices; Pension spending; Global
Cover IMF Staff Country Reports
Haiti: First Review Under the Staff-Monitored Program-Press Release; and Staff Report
International Monetary Fund. Western Hemisphere Dept.
This paper highlights Haiti’s First Review under the Staff-Monitored Program (SMP). The SMP will help the government restore macroeconomic stability and lower inflation―a key goal given the burden of high inflation on the poor. The SMP seeks to advance decisive governance reforms to enhance accountability. In particular, it emphasizes greater accountability through stronger public finance management, revenue administration, transparency, and anti-corruption measures. Progress on governance is key to ensure inclusive growth. The authorities have taken steps to strengthen accountability in the collection and use of public resources and have boosted the transparency of public procurement for emergency resources. IMF staff will continue to work closely with the authorities to support implementation of their program and help them build public support. Indeed, most elements of the authorities’ program are underpinned by ongoing IMF technical assistance. The IMF Fund will also continue to coordinate closely with Haiti’s other development partners to leverage efforts in support of common objectives.
Keywords:
Haiti's Staff-Monitored Program; transparency policy; central bank financing; management of the International Monetary Fund; governance reform; Social assistance spending; Energy subsidies; Commercial banks; Global
Cover IMF Staff Country Reports
Qatar: 2022 Article IV Consultation-Press Release; and Staff Report
International Monetary Fund. Middle East and Central Asia Dept.
Swift and decisive policy response to the Covid-19 pandemic has helped to mitigate the health and economic impact of the crisis. Fast vaccination rollout has also strengthened the economy’s resilience to new pandemic waves, paving the way for a speedy recovery. As the economy rebounds, a gradual exit from pandemic support measures is underway.
Keywords:
hydrocarbon price; CPI data; money market rate; financial asset; headline inflation; IMF's transparency policy; COVID-19; External sector statistics; Foreign assets; Global; Middle East; North Africa; East Africa
Cover Fiscal Monitor, April 2022
Fiscal Monitor, April 2022
Fiscal Policy from Pandemic to War
International Monetary Fund

Abstract

Just as uncertainty associated with COVID-19 pandemic was abating, Russia invaded Ukraine. Uncertainty endured, shifting from pandemic to war, affecting all countries but in different ways. Above-target inflation rates and inflation surprises have helped reducing debt-to-GDP ratios but such relief is often temporary. High uncertainty and marked divergences across countries require a tailored and agile fiscal policy response that is ready to adjust as the outlook becomes clearer. Fiscal policy will need to shift focus away from the exceptional pandemic-related measures as central banks increase interest rates to fight inflation. Emerging and developing economies that are net importers of energy and food will be hit the hardest by surging international prices. Many of these countries already experience scarring from the pandemic and have little fiscal space to tackle new spending pressures. Government should focus on those most affected by the crisis and priority areas. Ensuring greater resilience through investment in health, food, and energy security from cleaner sources has become even more urgent. Global cooperation to achieve these objectives is more important now than ever. As countries strive to promote an inclusive and green recovery from the COVID-19 pandemic—and formulate responses to the immediate impacts of increased energy prices—they face shared challenges to secure tax revenues, address inequalities, and reduce greenhouse gas emissions. National tax policies are under pressure to deal with cross-border spillovers—one country’s action affects other countries. Chapter 2 discusses how international coordination on tax matters (i) reduces profit shifting by multinationals and tax competition between countries; (ii) improves tax enforcement by lifting the veil of secrecy to tackle tax evasion; and (iii) limits global warming. The current energy crisis reinforces the case for coordination among major emitters to reduce reliance on fossil fuels, urging countries to not allow near-term responses to detract efforts to establish credible policies for emissions reductions in the medium term.

Keywords:
fiscal policy; public debt; inflation; government support; household savings; fiscal balance; war in Ukraine; commodity prices; poverty; social protection; green public finance management; tax competition; tax coordination; carbon tax; exchange of information; minimum tax
Cover IMF Working Papers
The Fiscal State-Dependent Effects of Capital Income Tax Cuts
Alexandra Fotiou
,
Ms. Wenyi Shen
, and
Susan Yang Shu-Chun
Using the post-WWII data of U.S. federal corporate income tax changes, within a Smooth Transition VAR, this paper finds that the output effect of capital income tax cuts is government debt-dependent: it is less expansionary when debt is high than when it is low. To explore the mechanisms that can drive this fiscal state-dependent tax effect, the paper uses a DSGE model with regime-switching fiscal policy and finds that a capital income tax cut is stimulative to the extent that it is unlikely to result in a future fiscal adjustment. As government debt increases to a sufficiently high level, the probability of future fiscal adjustments starts rising, and the expansionary effects of a capital income tax cut can diminish substantially, whether the expected adjustments are through a policy reversal or a consumption tax increase. Also, a capital income tax cut need not always have large revenue feedback effects as suggested in the literature.
Keywords:
WP; debt ratio; capital income tax effects; tax multiplier; fiscal policy effects; regime-switching models; non-linear DSGE model; income tax tax cut; income tax tax rate; cut effect; fiscal policy; rate data; tax revenue; capital income tax effect; cut increases government debt; output multiplier; Capital income tax; Fiscal consolidation; Corporate income tax; Consumption taxes
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 Staff Country Reports
India: 2019 Article IV Consultation-Press Release; Staff Report; Staff Statement and Statement by the Executive Director for India
International Monetary Fund. Asia and Pacific Dept
This 2019 Article IV Consultation with India discusses that India has been among the world’s fastest-growing economies in recent years, lifting millions out of poverty. However, growth slowed to a six-year low in the first half of 2019, with both consumption and investment decelerating owing to weak, especially rural, income growth, stresses in the nonbank financial sector, and corporate and environmental regulatory uncertainty. On the external sector, following a rise in vulnerabilities in 2018, stability has returned, anchored by high foreign reserve buffers and a modest current account deficit. With its strong mandate, the new government has an opportunity to reinvigorate the reform agenda aimed at boosting inclusive and sustainable growth. In the near term, given the cyclical weakness of the economy, monetary policy should maintain an easing bias at least until the projected recovery takes hold. Fiscal stimulus should be avoided given fiscal space at risk and revenue losses from the recent corporate income tax rate cut should be offset.
Keywords:
ISCR; CR; U.S. dollar; staff report projection; value; U.S. dollar-value; Indian rupee; U.S. dollar value; U.S. dollar exchange rate; CPI series; Government debt management; Fiscal consolidation; Global; Eastern Europe
Cover IMF Staff Country Reports
Switzerland: 2019 Article IV Consultation - Press Release; Staff Report; and Statement by the Executive Director for Switzerland
International Monetary Fund. European Dept.
The Swiss economy has performed relatively well since the global financial crisis. Growth compares favorably with most other advanced countries and aggregate employment has grown robustly. The fiscal position is strong and the external trade surplus remains large and stable despite several episodes of intense appreciation pressure owing to the Swiss franc’s reputation as a safe haven. Growth is expected to temporarily dip to 1.1 percent in 2019 on weakness in external demand. Risks to the outlook are tilted down. Switzerland is also facing several policy challenges: low interest rates are fueling risks in the real estate and mortgage markets; persistent subdued inflation has decreased the operational space for monetary policy; and population aging and technological change will require further upskilling and generate new demands for public resources.
Keywords:
ISCR; CR; government; government report; Switzerland; FINMA; authorities' interpretation; liability positions vis-à-vis nonresident; deposit insurance system; safe-haven pressure; Corporate income tax; Income; Global
Cover IMF Staff Country Reports
Ireland: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Ireland
International Monetary Fund. European Dept.
The Irish economy continues to expand strongly, benefitting from higher net exports by multinational enterprises and robust domestic demand. Accelerating wage growth reflects tight labor market conditions and inflation has started to pick up. Crisis legacies have diminished but some vulnerabilities persist. The outlook remains broadly positive, provided Brexit proceeds in an orderly manner. However, the economy operates near full capacity and an accelerating cyclical momentum could re-ignite a boom-bust dynamic. A no-deal Brexit represents the key downside risk, while escalation in global protectionism and sudden changes in corporate tax planning of multinational enterprises in Ireland could adversely affect the economy and public finances.
Keywords:
ISCR; CR; government; Ireland; headline inflation; housing supply strategy; central bank of Ireland; liability positions vis-à-vis nonresident; welfare benefits system; IMF staff; potential GDP; Corporate income tax; Housing; Financial sector; Credit; Global; Europe
Cover IMF Staff Country Reports
Luxembourg: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Luxembourg
International Monetary Fund. European Dept.
This 2019 Article IV Consultation discusses that Luxembourg’s growth prospects remain favorable, but downside risks arise from a weaker-than-expected global growth, a disorderly Brexit, changes in international tax rules, and a sharp tightening of global financial conditions. Domestically, rising real estate prices could exacerbate already elevated household indebtedness and increase affordability challenges. Fiscal policy should aim to maintain a strong fiscal position and preserve buffers. The government’s plans, while appropriate, will result in a slightly expansionary budget in 2019. The cost and timeline of the planned measures over the medium term remain to be determined. Given risks ahead, including from potential changes in international taxation, Luxembourg should build on its strong fiscal record and preserve sizeable buffers. Structural policies should focus on addressing key gaps in the economy. Further reforms of the pension system are needed to ensure its sustainability, while considering intergenerational equity and trade-offs of various reform options.
Keywords:
ISCR; CR; government; Luxemburg; IMF staff estimate; Q4; liability positions vis-à-vis nonresident; increase affordability challenge; Luxembourg economy; IP box regime; IMF's article; Mutual funds; Corporate income tax; Pension spending; Global; Europe