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Tax Reform and Debt Sustainability in Germany: An Assessment Using the Global Fiscal Model
Author: Mr. Dennis P Botman and Mr. Stephan Danninger
Series:
IMF Working Papers
Volume/Issue:
Volume 2007: Issue 046
Language:
English
Publication Date:
01 Feb 2007
DOI:
https://doi.org/10.5089/9781451866100.001
ISBN:
9781451866100
ISSN:
1018-5941
Pages:
30
Keywords:
WP; tax rate; growth effect; personal income; GFM simulation
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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In 2005, the German government announced a far-reaching fiscal adjustment program. This paper uses the IMF’s Global Fiscal Model to study its impact and explores options for addressing long-term pressures from population aging. The growth effects of the planned VAT increase are likely modest, largely owing to the stimulating effect of other tax reductions. The reform will improve the long-term debt path but achieving fiscal sustainability requires further adjustment over the medium term. An additional package of expenditure restraint, entitlement reform, and tax-base broadening compares favorably to other adjustment options. Spillover effects to trading partners of these policies are modest.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund