The Macroeconomic Impact of the IMF Recommended VAT Policy for the Fiji Economy: Evidence From a Cge Model

Value Added Tax (VAT) is a general consumption tax levied on goods and services. In September 2002, in the face of mediocre economic performance, deteriorating government finances and stagnant investment levels - all due to the political coups of 2000 -an increase in VAT was recommended to Fijian policy makers by the IMF as a remedy to Fiji's problems. The Fiji government, without an in depth economy wide repercussions of a VAT policy, welcomed it by announcing a 25% increase in VAT in its 2003 budget. Beginning 1 January 2003 all goods and services were levied a VAT rate of 12.5%. In this paper, we use a computable general equilibrium model to examine the economy wide effects of this VAT policy. We find that while the VAT improves government revenue and brings about a small 0.6% increase in real GDP, it fails to address investment levels. VAT actually leads to a decline in investments and a reduction in real consumption and national welfare. We highlight that large amounts of tax revenue are owed to government. This is three times more than what government will collect from the 25% increase in VAT. In this light, an alternative to VAT is to upgrade government's tax collecting mechanism. From this we deduce that the IMF policy is misdirected.     

Us Debt and Deficits: Time to Reverse the Trend

This article provides a primer on budget deficits from the creation of the federal government. Today federal government spending is 24% of GDP (compared with its historical average of 8.8%), fuelling debt of historic levels. The only effective way to reduce debt levels is to cut entitlement programmes and then set a tax rate sufficient, over the course of the business cycle, to fund government spending.     

Merging National Insurance Contributions and Income Tax: Lessons of History

This paper is a response to the British Chancellor of the Exchequer's consultation on closer integration of the operation of National Insurance contributions and income tax. Our historical research on proposals for a complete merger of the two systems enables people interested in tax reform to draw on experience and ideas of officials who grappled with issues similar to those facing us today. We show that officials identified the problem of maintaining increasing numbers of elderly people as long ago as 1950, and identify when and why the British government adopted a pay‐as‐you‐go basis for the National Insurance Fund. We conclude that the advantages of National Insurance contributions separate from income tax are not negligible, but that a merger would be fairer than the present system. Our principal concern is that the contributory principle may raise unrealistic expectations regarding state pensions as it encourages a mistaken belief that these are paid from contributions made by pensioners in the past. We therefore recommend that the government should produce an annual statement showing how state pension liabilities are to be met.     

Mexico''s fiscal crisis

Mexico's current crisis has its origins in a number of structural conditions that developed in the 1970s. This paper examines one of these structural impediments, the country's fiscal disequilibrium. An empirical analysis of the country's tax structure indicates that there is ample scope for major tax reforms geared to introducing more responsiveness into the country's tax collection system. Given that the government will have to reduce its budget deficit to comply with IMF stabilization requirements, the analysis indicates tax reform rather than expenditure reduction would be the most efficient policy in achieving this objective.     

General equilibrium and optimal taxes

It is shown that if subsidies are not excessive, there exists a general competitive equilibrium in the presence of a complex tax structure. Furthermore, under certain continuity assumptions, a tax structure which is optimal from the social point of view can be determined. Procedures maximize quasi-concave after tax profit functions. Consumers have convex budget sets reflect- ing their income from sales and profits minus taxes on fixed income and progressive sales taxes. Their preferences are interdependent, intransitive and incomplete. The government provides public goods and determines the optimal tax regime on the basis of its preferences on the final competitive consumption allocation.     

Implications of productive government spending for fiscal policy

The standard assumption in macroeconomics that government spending is unproductive can have substantive implications for tax and spending policy. Productive government spending introduces a positive feedback between the tax rate, the productive capacity of the economy, and tax revenue. We allow marginal tax revenue to be optimally allocated between productive subsidies to human capital and utility-enhancing government consumption and calculate Laffer Curves for the US. Productive government spending yields higher revenue-maximizing tax rates, steeper slopes at low tax rates and higher peaks. The differences are particularly pronounced for the labor-tax Laffer curve. The use of tax revenue is an important determinant of the actual revenue that a tax rate increase generates.     

The Role of Symmetry between the Revenue and the Expenditure Side of the Government Budget in the Debate about the Potential Negative Effects of Tax Competition

The effects of capital tax competition are reconsidered in this paper incorporating the argument that the expenditure structure of public budget should reflect its revenue structure. The paper offers a small open economy model where capital and labour tax revenues are used exclusively on the provision of public inputs. It is shown that if the revenue side of the government budget exactly matches the expenditure side that is if industrial public goods are financed by both private production factors with the weights reflecting the contributions of public inputs to the private factor productivity then public inputs are provided optimally even in the presence of tax competition.     

Optimal taxation and intergovernmental transfer in a dynamic model with multiple levels of government

In this paper, we study the optimal choices of the federal income tax, federal transfers, and local taxes in a dynamic model of capital accumulation and with explicit game structures among multiple private agents, multiple local governments, and the federal government. In general, the optimal local property tax is zero if the local property tax is constrained to be nonnegative, whereas the optimal local consumption tax is always positive. When the local consumption tax is chosen optimally, the federal income tax can be either positive or negative. For most reasonable parameter values, our numerical calculations have shown that with a positive local consumption tax there exists a reverse transfer from local governments to the federal government.     

Public infrastructure investment,output dynamics,and balanced budget fiscal rules

We study the dynamic macroeconomic effects of public infrastructure investment under a balanced budget fiscal rule, using an overlapping generations model of a small open economy. The government finances public investment by employing distortionary labor taxes. The balanced budget rule implies a negative short-run output multiplier that exceeds (in absolute terms) the positive long-run output multiplier. Larger public capital spillovers sharpen the intertemporal output tradeoff. In contrast to conventional results regarding public investment shocks, we obtain dampened cyclical responses for plausible parameter values. The cyclical dynamics arise from the interaction between the labor tax rate, the tax base, and the intergenerational spillover effects. We show that financing scenarios involving public debt creation can substantially reduce the short-run output contraction and the transitional macroeconomic fluctuations induced by public investment.     

State and local tax competition in a spatial model with sales taxes and residential property taxes

This paper presents a theoretical model with a uniformly populated line that is divided into local jurisdictions (and/or states). If one level of government imposes sales and residential property taxes, and if the spatial extent of each taxing jurisdiction is positive and finite, then (in Nash equilibrium) the sales tax rate is less than residential property tax rate, housing consumption is suboptimal, and the public good is underprovided in each jurisdiction. If a very large state (or country) is divided into local jurisdictions, and if both levels of government choose tax rates endogenously, then under some assumptions there is an efficient outcome.     

我国部门预算委托代理问题的制度分析

作为纳税人的社会公众与政府之间本质上是一种委托代理关系。在部门预算中，该委托代理关系表现出多环节的委托授权链条。针对目前政府部门预算中由于信息不对称、监督弱化而导致的腐败和共谋问题，提出了解决代理问题的对策。     

对我国潜在产出、结构预算与财政态势的关联性研究

本文基于新凯恩斯型动态模型的状态空间模型对潜在产出进行估计，并利用估计结果计算出政府财政预算中的结构性成分和周期性成分。通过对周期性预算余额和结构性预算余额的分析发现，我国财政自动稳定器功能较弱，财政收入和支出的周期性波动相对较小；周期性预算余额的变化与经济周期波动相吻合；我国1998年以来的财政态势具有明显的反周期特点，其对于拉动经济增长、减少经济波动起到了重要作用。     

SIMPLIFYING THE TAXATION OF PENSIONS

The current tax framework for pensions is now economically incoherent. The changes in the 1997 Budget made it more so. Changes can be made to restore its coherence. However, any attempt to remove tax relief at the higher rate, as has been discussed by academics and commentators recently, would be wrong in principle and could not work in practice. The pension fund tax codes and the rules for annuitisation should also be simplified significantly. The Inland Revenue no longer needs to design detailed rules to prevent people 'abusing' tax relief. Such detailed rules are extremely costly to implement and, because they make the whole system impenetrable, stop people from using pension vehicles for saving.     

基本养老保险基金：做实账户制还是名义账户制？

我国城镇企业职工基本养老保险个人账户在本质上体现的是养老权而不是财产权,基本养老保险个人财户权益的根本意义在于保障企业职工的社会养老权。我国从2001年开始实行做实企业职工基本养老保险个人账户试点,这不仅未能化解养老金支付风险,而且加大了养老保险基金保值增值难度,基金贬值程度也随着做实比例的提高而增大。另外,做实个人账户抬高了储蓄率并抑制了投资和消费需求,对经济发展产生了挤出效应。为解决上述问题,应建立更加公平可持续的养老金制度,通过名义账户制从根本上体现企业职工的财产权和社会养老权,解决做实账户制所出现     

Energy intensity and directed fiscal policy

This paper assesses the effects of fiscal policy on economy-wide energy intensity within an endogenous growth framework. To this end, we first develop a two-sector (investment good and consumption good) augmented AK model by integrating the Uzawa model with Rebelo’s AK model, and assume that a non-renewable resource is one of the factors of production. Using this framework, we solve the model for the short and long run, identifying the sufficient parameter conditions that ensure higher energy intensity in the investment goods sector. We then introduce a balanced budget government, whose objective is to decrease the economy-wide energy intensity by levying tax on the energy-intensive investment goods sector and subsidizing the consumption goods sector. Contrary to our expectations, we find that this fiscal policy design increases economy-wide energy intensity as it leads to a decline in real GDP without changing total energy consumption. On the basis of this model, we propose the concept of a ‘directed fiscal policy’, which connotes a reduction of the economy-wide energy intensity by following a heterogeneous taxation policy across sectors.     

Growth effects of annuities and government transfers in perpetual youth models

We show that in overlapping generations endogenous growth models with uncertain lifetime, the introduction of government transfers always increases economic growth by crowding out the private annuity market and increasing accidental bequests. In particular, if the government imposes a flat-rate consumption tax (which is neutral to the consumption–saving margin), uses part of the tax revenue for unproductive purposes, and rebates the rest equally across agents as a lump-sum transfer, the economy grows faster and improves the welfare of future generations.     

论企业年金负债的会计处理对企业资本结构的影响

实施企业年金计划企业的会计报表显示，这些企业的财务杠杆率相对企业的举债能力而言普遍偏低，但如果企业将年金计划的偿付责任作为企业长期负债合并到企业资产负债表中，则这类企业的低财务杠杆率相对于最优财务杠杆率的差距将减小。本文从企业年金缴费对应征税收入影响和会计处理的角度，分析了企业年金计划对企业边际税率和企业资本结构调整的作用。     

Exchange rates, tax-subsidy schemes, and the revenue from foreign trade in a centrally planned economy

Conclusions It has been argued that while in the traditional analysis of the classic CPE the exchange rate has only an accounting function, inappropriate methods of national income accounting can lead to changes in the exchange rate generating changes in the real economy, provided that trade in unbalanced in foreign currency prices. This thesis was explored by examining the way the profits from foreign trade were calculated by the Ministry of Foreign Trade, and then transferred to the state budget. It was shown that the correct measure of the state's increased command over domestic resources from engaging in foreign trade, derived from the implicit taxes on that sector, was the ministry's profits on its domestic operations, the first term in (2). However, evidence was presented which suggested that its profits on foreign currency account measured in domestic currency, the second term in (2), were also passed over to the state budget. This implies that transferred profits from foreign trade will overstate the underlying command over resources when there is a balance of payments surplus, and understate them when there is a deficit. The consequence of this is that the domestic economy faces a series of erratic, though small, inflationary and deflationary impulses, regardless of changes in the exchange rate.The theoretical role of the preisausleich system was explored in some detail and it was argued that, although the system has been designed to insulate the domestic economy from external disturbances, there were clear reasons why it had come to play a major part in revenue raising. Specifically, it is administratively convenient to tax resources at their point of entry into or exit from the economy; the taxation of foreign trade widens the tax base and reduces the visibility of the tax system. But, of course, this grafting onto the preisausgleich of a second major function of revenue raising does lead to the development of a further channel through which external disturbances can pass into the domestic economy. That is external disturbances impact on the domestic economy not only through the production and welfare effects of changing exports and imports, and through whatever tenuous links are allowed between foreign and domestic prices, but also insofar as those disturbances affect the ministry's profits from foreign trade. In short, foreign economic disturbances show up in variations in the position of the non-inflationary government budget constraint. To that extent the second function of the preisausgleich impairs its ability to perform its original insulation function. In a minor way, the successful non-inflationary performance of the insulation function has always required adjustments in the government budget constraint. But the growth in the importance of foreign trade taxation has magnified the importance of this phenomenon, and led to a trade-off between the two functions.University of Bath. Initial research for this paper was carried out under ESRC grant HRP 7417/1.     

Determinants of government underfunded public pension liabilities in the OECD

Underfunded government liabilities for public pensions constitutes a major expenditure in the management of social programmes in many countries, but to date has not attracted much attention from accountants as it does not easily fit within an accrual-based accounting system. This paper discusses major measurement problems associated with this liability and then examines determinants of variations in projected flow-based funding patterns among OECD governments. Alternative ‘behavioural persistence’ and ‘regression to the mean’ hypotheses about the determinants of underfunding practices are formulated and tested using an OECD data set describing the financial and socio-economic characteristics of government-sponsored public pension systems in these countries. Consistent with the behavioural persistence hypothesis, cross-sectional variations are found to be associated with the funding ratio and the rate of taxation required to keep government debt constant. Variations in underfunding practices across the sample are also sensitive to cultural differences in attitude towards public pension accountability between continental European and Anglo-American countries.     

Growth Opportunities,Stockholders' Claim/Liability on Pension Plans,and Corporate Pension Policies

In this study, I derive the value of stockholders' claim on a pension surplus and stockholders' liability for a pension deficit in the post‐Employee Retirement Income Security Act regulatory environment. Based on that valuation, I develop a model of corporate pension policies in which sponsoring firms weigh contributions to their pension plan against the exercise of growth options in the allocation of limited financial resources. The model shows how corporate pension funding and asset allocation policies are shaped by the sponsoring firms' characteristics, such as growth options, the marginal corporate tax rate, and regulatory variables such as the deficit reduction contribution rate, the variable‐rate insurance premium, and the maximum possible fraction of operating assets that can be seized by the Pension Benefit Guaranty Corporation. I discuss policy and empirical implications of the theoretical results. Copyright © 2016 John Wiley & Sons, Ltd.