Bruni, Franco, Alessandro Penati, and Angelo Porta, “Financial Regulation, Implicit Taxes, and Fiscal Adjustment in Italy” in Fiscal Policy, Economic Adjustment and Financial Markets, edited by Mario Monti (Washington: IMF, 1989), pp. 197-230.
Chamley, Christopher, “Taxation of Financial Assets in Developing Countries” in The World Bank Economic Review, Vol 5, September 1991, No. 3, pp. 513-533.
Dixit, Avinash, “The Optimal Mix of Inflationary and Commodity Taxation with Collection lags,” IMF Staff Papers, Vol. 38 (Sept. 1991), pp. 643-654.
Giovannini, Alberto and Martha De Melo, “Government Revenue from Financial Repression,” The American Economic Review, Vol. 83, No. 4, September 1993, pp. 953-963.
Pinto, Brian, “Black Market Premia, Exchange Rate Unification, and Inflation in Sub-Saharan Africa,” The World Bank Economic Review, Vol. 3, September 1989, Number 3, pp. 321-338.
Sherwood, Joyce, “Revenue Features of Multiple Exchange Rate Systems: Some Case Studies,” IMF Staff Papers, Vol. 5 (1956), pp. 74-107.
Stiglitz, Joseph, “Role of Government in the Contemporary World,” paper presented at the IMF Conference on Growth and Income Distribution, Washington, June 1-2, 1995.
Tanzi, Vito, “Inflation, Real Tax Revenue, and the Case for Inflationary Finance: Theory With an Application to Argentina,” IMF Staff Papers, Vol. 25, No. 3 (September 1978), pp. 417-451.
Tanzi, Vito, “The Budget Deficit in Transition: A Cautionary Note,” IMF Staff Papers, Vol. 40, No. 3, September 1993, pp. 697-707.
Tanzi, Vito, “Corruption, Governmental Activities, and Markets”, IMF Working Paper 94/99, forthcoming in revised form in Fiorentini and Peltzman, The Economics of Crime (Cambridge University Press).
Paper presented at the 51st Congress of the International Institute of Public Finance, Universidade Nova, Lisbon, Portugal, August 21, 1995 and at a seminar at the Ministry of Finance of China, Beijing, August 29, 1995. The views expressed are strictly personal. Comments received on an earlier draft from Roberta Gatti, Professor Agnar Sandmo, and Ludger Schuknecht were very much appreciated.
This increase was due mainly to governmental policies rather than to technical factors often summarized under the term of “Wagner’s Law”.
The contribution of the “New Italian School” through the work of Alberto Alesina, Guido Tabellini and others is also relevant in this context.
Of course, the availability of policy instruments depends on the availability of good institutions. Here we focus on the instruments rather than the institutions.
Johansen (pp. 22-25) lists the main instruments at the government’s disposal, including monetary policy, prohibitions, and government’s own business activity but then limits the fiscal policy instruments to payments to the government (taxes) and payments from the government.
Gini coefficients are generally much higher in developing countries than in developed countries.
In its World Development Report 1983, the World Bank attempted to construct “indices of price distortions” for many developing countries. It is not clear how accurate is the picture provided by this heroic attempt. See p. 60 of that Report.
In the environmental area, regulations have often been used in industrial countries. These often have a quasi-fiscal effect. Of course, tax incentives and tax expenditures are also used to achieve this objective.
This could be considered the subsidization of a merit good.
Please note that the burden of the tax is not on the general taxpayers but on those who own the houses that are rented.
Please note that in this sentence, efficiency refers to the allocative concept rather than to the concept as defined earlier.
Alternatively, they may be forced to sell their products domestically at prices which are well below the world price for that products. This is frequently the case with petroleum, which, in oil-producing countries such as Nigeria, Iran, Venezuela, Russia and other countries, is sold at what appear to be ridiculously low prices. In this case, the implicit taxation of the oil sector and the implicit subsidies to oil consumers do not appear in the budget. In these countries, the implicit taxes on the producers and the implicit subsidies to the producer may be very large.
In particular circumstances, especially when the Inflation rate is high and the interest rates are low, the implicit subsidies to those who borrow can be huge. As these subsidies are not shown in the budget, a country can have high inflation even when the formal budget appears to be in balance. This was the case in Brazil in years past.
Please note that the table refers to years in the 1970s or the first half of the 1980s. In some of the countries covered the current situation may be very different.
The reader is sent to the original article for details.
This is also especially true in economies in transition.
This may explain, for example, why there is much less variation in taxing and spending for industrial countries at a point in time than there is over time. Please refer again to Table 1.
A progressively larger number of countries has been introducing legislation that makes the central bank an independent agency.
The tendency is also to remove impediments to capital movements.
The Chilean-initiated experiment of privatizing the pension system is an example of a market-friendly way to promote a governmental objective.
In Russia, for example, the Central Bank had, until recently, directly financed at highly negative interest rates the activities of state enterprises. To some extent, the financing compensated the enterprises for the social expenditures they were carrying. (See Tanzi 1993.) If the enterprises no longer finance these social expenditures, the budget may have to take over some of them.
For a discussion of related issues see Tanzi and Schuknecht (forthcoming).