No abstract

"In 2001, Russia dramatically reduced its higher rates of personal income tax (PIT), establishing a single marginal rate at the low level of 13%. In the following year, real revenue from the PIT increased by about 26%. This 'flat tax' experience has attracted much attention (and emulation), making it perhaps the most important tax reform of recent years. But it has been little studied. This paper asks whether the strong performance of PIT revenue was itself a consequence of this reform, using both macro evidence and, in particular, micro level data on the experiences of individuals and households affected by the reform to varying degrees. It concludes that there is no evidence of a strong supply side effect of the reform. Compliance, however, does appear to have improved quite substantially - by about one third, according to our estimates - though it remains unclear whether this was due to the parametric tax reform or to accompanying changes in enforcement." Copyright � CEPR, CES, MSH, 2005.

Countries in Latin America and the Caribbean (LAC) have made important strides in promoting financial inclusion of firms and households. However, while the region is broadly at par with its peers on financial inclusion of firms, household inclusion lags behind. Nonetheless, there is substantial heterogeneity across LAC countries. Reducing borrowing costs and strengthening further the regulatory environment, while taking steps to protect efficiency and stability of the financial system, could help close financial inclusion gaps. Reducing financial participation and monitoring costs and relaxing collateral constraints will help spur growth and reduce inequality though trade-offs are likely, as illustrated in the case of Guatemala, El Salvador, and Peru. JEL Classification Numbers: D63, F43, G21

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 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 published to elicit comments and to further debate.The paper employs a principal-agent framework to analyze the role and design of outcomesbased conditionality in the presence of market frictions and domestic opposition. The results suggest that outcomes-based conditionality is a good option for the IMF when opposition to reforms is relatively weak and when the IMF loan is unsubsidized. The only role conditionality ends up playing in this case is that of an efficiency tool. The benefits of outcomes-based conditionality in the presence of strong opposition are less clear, and using this conditionality as an incentive tool would require that IMF financing be subsidized. JEL Classification Numbers: F33, D82

The discussion of global and regional imbalances has put the spotlight on the possible link between current accounts and structural policies. Drawing on standard empirical current account models, the paper finds that the commonly recommended structural factors cannot explain the widening of imbalances prior to the 2008-09 crisis. That said, structural factors do help explain some part of long-standing crosscountry differences in the current account levels. In particular, countries with stricter credit market regulation, higher taxes on businesses, lower minimum wage (in particular,in slow growing economies) and generous unemployment benefits tend to have higher current account balances than others.