Fiscal Devaluation and Fiscal Consolidation The VAT in Troubled Times

This paper focuses on two core tax design issues that arise in addressing current fiscal challenges. It first explores the idea, prominent in troubled Eurozone countries, of a "fiscal devaluation": shifting from social contributions to the VAT as a way to mimic a nominal devaluation. Empir...

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Main Author: Keen, Michael
Other Authors: Mooij, Ruud A. de
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2012, 2012
Series:IMF Working Papers; Working Paper
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Summary:This paper focuses on two core tax design issues that arise in addressing current fiscal challenges. It first explores the idea, prominent in troubled Eurozone countries, of a "fiscal devaluation": shifting from social contributions to the VAT as a way to mimic a nominal devaluation. Empirical evidence is presented which suggests that in Eurozone countries this may indeed improve the trade balance in the short-run, though, as theory predicts, the effects eventually disappear. The paper then assesses the wider scope for VAT reform in meeting fiscal consolidation needs, developing and beginning to apply a methodology for finding additional VAT revenue in ways less distortionary and fairer than further raising the standard rate
Physical Description:48 p.
ISBN:9781475502480
1475502486