This is the first study that estimates the impact of corruption on the revenue generating capacity of different taxes in the Middle East. We find that the low revenue collection as a share of GDP compared to other middle-income regions is due in part to corruption. Certain taxes are, however, more affected by corruption than others. Taxes requiring frequent interactions between the tax authority and individuals, such as taxes on international trade, seem to be more affected by corruption than most other forms of taxation. This suggests that if governments need to raise more tax revenues in a way that minimizes distortions and maximizes social welfare, they should implement reforms that reduce corruption, or alternatively, raise revenues from taxes that are less susceptible to corruption. The potential measures for reform of the revenue system and administration are examined. JEL Classification Numbers: H21; H26; H83
This paper investigates the usefulness of different definitions of the budget deficit and their impact on fiscal sustainability. The analysis shows that a number of alternative definitions of the budget deficit are useful, some even extremely useful, for analyzing the impact of fiscal policies. The choice among the alternatives depends mainly on the purpose for which it is intended. However, despite the usefulness of the different definitions of the deficit, their order of magnitude in South Africa differs only marginally from that of the operational deficit. In our analysis of fiscal sustainability, the full range of possibilities have been accommodated in the different scenarios with the operational deficit. With a finite time horizon medium term current fiscal policy can be said to be sustainable or intertemporaly consistent, if it is able to achieve a given target level of the debt/GDP ratio. Unlike the infinite time horizon case, this target level might be nonzero. In this paper the latter case has been investigated. Three possible alternatives were tested and the results indicate that there is little room for fiscal maneuverability in South Africa without jeopardizing fiscal discipline policies. In the longer term, different definitions of the budget balance do not change this reality.
JEL Classification Numbers:H62
This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the authors and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the authors and are published to elicit comments and to further debate.This study estimates the impact of corruption on the revenue-generating capacity of different tax categories in the Middle East. We find that the low revenue collection as a share of GDP there compared to other middle-income regions is due in part to corruption, and certain taxes are more affected than others. Taxes that require frequent interaction between the tax authority and individuals, such as taxes on international trade, seem to be more affected by corruption than most other types of taxation. This suggests that if governments need to raise more tax revenues in a way that minimizes distortions and maximizes social welfare, they should implement reforms that either reduce corruption or raise revenues from tax categories that are less susceptible to corruption. Possible reforms of the revenue system and administration are examined.
The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are fmhlished to elicit comments and to further debate.
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