IMF Advice to Low-Income Countries on Tax Policy

Transcription

1 Final Draft Feb 20, IMF Advice to Low-Income Countries on Tax Policy A Review of IMF Policy in Practice ( ) Lead Authors: Nathan Coplin Jo Marie Griesgraber Researchers: Patricia Altamirano Martha DiSimone Paula-Anne Omiyi Chaz Rotenberg Dolores F. Rowen N deye N doungou Traore This study was commissioned by Oxfam

2 Final Draft Feb 20, Contents Introduction 1 Indicators for Pro-Poor IMF Advice on Tax Policy 2 Key Findings 4 Appendices IMF Policy Advice to PRGT Countries: Considerations for Poverty and Inequality 9 Frequency of IMF Advice on Tax Policy Indicators 10 Frequency of IMF Advice on Tax Policy Indicators: Regional Comparison 11 PRGT Countries & Level of Engagement with the IMF 12

3 IMF Advice to Low-Income Countries on Tax Policy Assessing How IMF Policy is Practiced ( ) Introduction New Rules for Global Finance was commissioned by Development Finance International to carry out a desk-review of IMF documents as part of an Oxfam examination to determine whether the IMF s new narrative on inequality is translated into concrete action through their advice to low income countries with regard to tax policy. The documents reviewed included Article IV or annual surveillance documents, and documents related to loans, Policy Support Instruments (PSI), and Staff-Monitored Programs (SMP). The countries reviewed were 76 low income countries eligible for funding from the IMF s highly concessional Poverty Reduction and Growth Trust (PRGT). This IMF s new narrative emerged in early 2011 through several public statements and papers, including, a progressive stance on tax policy in developing countries. This policy paper, Revenue Mobilization in Developing Countries 1, approved by the Executive Board in March 2011, encourages pro-poor tax policies when the IMF gives tax advice to member-states. The paper does not indicate reliance on previous work by either the World Bank or the IMF s Poverty and Social Impact Assessments (PSIA) teams. 2 The new narrative became more visible with the release of IMF research in 2014 which highlighted tax policy as a redistributive tool that could reduce inequality and improve economic growth. 3 This Revenue Mobilization paper and the policies laid out in it is the key barometer by which Fund advice is evaluated in this research (all policy indicators are described in Table 1 below). In addition to the policy areas derived from the 2011 Policy Paper, 1 IMF Policy Paper. Revenue Mobilization in Developing Countries. Approved by Cottarelli, Carlo. March Pg However, the influence of the PSIA cannot be excluded since the Fund s own former PSIA team, including for example David Coady and Robert Gillingham, were incorporated into the Fiscal Affairs Department (FAD) which produced the 2011 Revenue Mobilization paper. 3 Berg, Andrew, Jonathan Ostry and Charalambros G Tsangarides. Redistribution, Inequality and Growth and "fiscal policy and inequality" 1

4 this research assesses the depth of the IMF s general considerations for poverty and inequality. Allowing 9 months for staff to implement the 2011 policy, researchers examined IMF documents for PRGT eligible countries from January 2012 through May The review uses the IMF s own definitions of pro-poor tax policies, and then seeks specific use of those criteria by examining staff reports on specific advice provided in countrylevel situations. Box 1. Indicators for Pro-Poor Tax Policy Advice *Based on 2011 IMF Staff Paper Revenue Mobilization in Developing Countries 1. Value Added Tax (VAT) is an indirect tax which many civil society organizations regard as regressive since the poor spend proportionally more of their income than those with higher levels of disposal income. On the other hand, the IMF views the VAT as an efficient method to raise revenue (especially for tax authorities with limited capacity) which can finance pro-poor spending. 4 The IMF does recognize that a VAT can be problematic for tax progressivity. 5 As a result, the IMF policy paper regards VAT with a high-threshold as pro-poor: e.g., a retail store must have at least $50,000 in sales annually before it must register to collect and pay VAT; anything smaller, such as a corner taco vendor would not register, thereby exempting the smallest enterprises where presumably most of the clients are among the poorest. Therefore, any reference to a threshold is regarded, for the purposes of this report, as 6 complying with the pro-poor policy. a. VAT rates: In order to raise more government revenue for targeted programs for the poor, the IMF encourages higher rates for VAT, which is viewed as less burdensome for tax authorities and thus as a more efficient revenue mobilizer. As Oxfam and civil society organizations (CSOs) views differ from the IMF s position, IMF advice on VAT rates were scored neither positive nor negative. b. Exemptions: Similarly, the IMF argues that exemptions undermine pro-poor policy since exempting any goods, even those frequently purchased by the poor, benefits the wealthy more, and by streamlining income collection, the government can mobilize more revenue to fund programs targeted to serving IMF Staff Report. Fiscal Policy and Income Inequality. January Pg 41 IMF Staff Report. Fiscal Policy and Income Inequality. January Pg 42 IMF Policy Paper. Revenue Mobilization in Developing Countries. pg IMF Staff Report. Fiscal Policy and Income Inequality. January Pg 41 2

5 the needs of the poorest. 8 Since Oxfam and most CSOs do not share the IMF s position on exemptions, references to exemptions were neither scored as positive or negative. 2. Excise taxes are levied on luxury goods or on sin products such as alcohol and tobacco. The IMF is inconsistent on its position sometimes welcoming the added income, especially from alcohol and tobacco taxes, but sometimes discouraging luxury taxes as inefficient use of tax administration resources, costing more to collect than the income they yield. Therefore, this report does not score advice on excise taxes as positive or negative, given the IMF s own ambivalence, although CSOs tend to support such taxes. 3. Trade taxes, most commonly tariffs on imports, are commonly discouraged by the IMF which favors overall trade liberalization, even though the IMF itself has found that when low income countries remove tariffs they rarely are able to recoup the lost revenue through other taxes or fees. This report gives a positive score when the IMF supported revenue policies that replaced income lost through trade liberalization or cutting tariffs. 4. Corporate Income Tax: The IMF explicitly supports raising corporate income taxes (CIT). The IMF also discourages tax incentives to attract business investments, whether foreign or domestic. This report therefore scores any reference to introducing CIT, raising CIT, removing or lowering tax incentives, broadening the base for CIT, halting illicit financial outflows (e.g., through mispricing of costs and profits allocated to different operations within the same multinational corporation) as complying with IMF pro-poor policy. 5. Natural Resource Revenue: The IMF expresses explicit concerns about the possibilities for abuses by extractive companies (e.g., mining, oil, gas, forestry). This report rates as positive any advice to increase taxes or royalty payments or to renegotiate contracts. 6. Personal Income Tax: The IMF pro-poor policies regard personal income taxes as too costly and impractical to implement in low income countries. Any recommendation in support of PIT would have been scored as pro-poor, particularly if the IMF is advising on a progressive framework or schedule. 7. Property Taxes: The IMF regards introduction of or increases in property taxes as propoor. The IMF also views levying taxes on property as an efficient use of administrative resources. Reviewers therefore scored any advice to implement or strengthen property taxes as pro-poor. 8 IMF Staff Report. Fiscal Policy and Income Inequality. January Pg 41 3

6 8. Wealth Taxes: Oxfam and CSOs generally regard taxes on capital gains, taxes on interest or on inheritance as pro-poor and would have been scored as positive; the 2011 IMF policy paper is silent on these taxes. 9. Tax Administration: In addition to advice on specific tax policies, reviewers also considered as pro-poor IMF advice on tax administrative practices such as: a. The creation or improvement of Large Tax Payer Offices (LTO). b. The increased efficiency or effectiveness of national and sub-national tax administration. Note: The two indicators below do not derive from the 2011 IMF Policy Paper 10. Inclusion in IMF Consultations: A final category that reviewers regarded as pro-poor and therefore positive was any indication of consultation between IMF staff and local civil society organizations, academics, think-tanks, Members of Parliament, and labor unions. 11. Pro-poor and Inequality Reduction Advice: Any specific language encouraging steps that are pro-poor or that focus on reducing inequality. KEY FINDINGS 1. Does the IMF advice to PRGT countries take into account of poverty and equity? On average the IMF does take into account both poverty and inequality during its consultations and negotiations with PRGT countries. Poverty is addressed more consistently throughout all of the IMF s advice twice as much as inequality is addressed. Regional Analysis: The IMF took poverty and inequality into consideration the most in Sub Saharan Africa discussing poverty issues 12 times on average during its consultations and negotiations. Note: The definition for Inequality considerations is fairly broad (see Appendix I). The Fund s considerations for inequality from January 2012 to May 2014 were primarily focused on 4

7 inclusive growth and financial inclusion (i.e. microfinance). The IMF s recommendations and discussions did not focus much on income gaps or reducing income inequality. 2. Are there any policy areas, regions or specific countries where IMF advice could be considered pro-poor? Or not pro-poor? Value Added Tax (VAT): Where the IMF promotes the introduction or strengthening of a VAT, this could be considered to be pro-poor based on the Fund s view that more tax revenue can be collected efficiently to finance pro-poor spending. The IMF s conviction on this view is supported by the findings from this research: Fund staff promoted the VAT in nearly 60 percent of its engagement with PRGT countries. Given the concern regarding the progressivity of the VAT, as an indirect tax, the 2011 IMF policy paper recommends a fairly high threshold in order to make the VAT more pro-poor. In this regard, the IMF has been less successful in meeting the propoor standards that it established in Surprisingly, only in 5 percent of PRGT countries was there any evidence of IMF support for specific thresholds, and even less for ensuring thresholds that would exclude the smallest establishments from the need to register for and collect VAT. Regional Analysis: The IMF s Sub-Saharan Africa division was the most consistent (69 percent of the time) in its promotion of introducing or strengthening a VAT. However, IMF advice to SSA countries to accompany the implementation of a VAT with threshold was the lowest among all regions (only 4 percent). The regions of Western Hemisphere and Middle East North Africa received the lowest amount of advice on introducing or strengthening a VAT (both at 25 percent). VAT exemptions can be the result of various factors: pressure from interest groups, efforts to stimulate certain sectors or as a way to maintain low prices for basic goods. As stated above, the IMF s overarching position is that exemptions should be removed or limited as much as possible. This analysis finds that the IMF is fairly consistent with its 2011 policy recommendations promoting a reduction in tax exemptions in 21 percent of negotiations and consultations with PRGT countries. 9 9 This analysis did not identify which countries did or did not have tax exemptions in place prior to IMF consultation or negotiation. Therefore, IMF advice on reducing exemptions may only occur in 21 percent of documents because only a small number of PRGT countries have exemptions in place. For this reason, determining the precise degree to which IMF advice on tax exemptions in consistent with pro-poor policy is beyond the scope of this paper. 5

8 A Country Review of IMF Advice on VAT Exemptions: Uganda Uganda provides a clear example of consistent IMF advice on reducing and/or terminating VAT tax exemptions. From December 2011 to December 2013 and through various forms of engagement (Article IV consultations, negotiations related to a Letter of Intent (LOI), a Policy Support Instrument (PSI) and program review documents), the IMF advised the removal of numerous tax exemptions: December 2011 (LOI): Eliminate VAT exemptions for intermediate products. May 2012 (LOI): Reinstate VAT on water, Extend VAT to computers; suspend existing VAT and corporate income tax exemptions and holidays; terminate VAT exemption on textile sector. December 2012 (PSI): Enforce discipline in issuance of tax exemptions. July 2013 (Art IV): Eliminate VAT exemptions on hotel accommodation, water for domestic consumption and packing material. November 2013 (LOI): Exemptions for i) hotel accommodation, ii) the textile sector, iii) packaging materials, and iv) feeds for poultry and livestock are to be terminated; eliminate tax exemptions on income derived from agro processing and export businesses; terminate VAT exemptions in the textile sector and for computers, software, printers. December 2013 (PSI Review): Remove exemptions where they are no longer useful after VAT gap analysis; complete a VAT gap analysis to identify exemptions VAT Exemptions & Inequality Concerns: that can There be removed. is one exception to the IMF s position to remove tax exemptions, specified in the 2011 Policy Paper: the equity case for rate differentiation [i.e. lower VAT rate or exemptions] is generally stronger for developing countries and the desirability of rate differentiation depends on a government s equity objectives. 10 In a few cases, the IMF takes into consideration equity concerns a great deal (Nicaragua, Georgia, Papua New Guinea, Timor Leste, Afghanistan, Liberia, Sierra Leone, Ghana and Ethiopia). Only in the case of Sierra Leone does the IMF discuss exemptions, but not in great detail. This only indicates that there may be space for designing tax exemptions that can balance the dual objectives of revenue collection and reduction in inequality. Given the IMF s new emphasis on reducing inequality, the IMF should consider clarifying its position on tax exemptions. 10 IMF Policy Paper. Revenue Mobilization in Developing Countries. pg 26 6

9 Natural Resource Transparency: In 46 percent of the documents the IMF supports greater transparency in country relations with extractive industries, though in just 13 percent of those documents does the Fund support raising taxes or royalties to secure greater revenue. The IMF is promoting transparency in the extractives sector, mostly through encouraging countries to comply with the Extractives Industry Transparency Initiative (EITI) standards. The significance of the extractives sector - for tax revenue varies for each country. Nonetheless, the IMF promotion of greater transparency in this area is largely positive and pro-poor. Regional Analysis: The Western Hemisphere division of the IMF is the most aggressive in promoting greater transparency in the extractives sector making such recommendations in 100 percent of their consultations and negotiations with member countries. The European division promotes resource revenue transparency the least only 15 percent of the time. The IMF provides the most frequent advice to increase taxes or royalties on extractives in the Sub-Saharan Africa region in nearly 18 percent of their consultations and negotiations with member countries. Excise Taxes: Despite the Fund s ambivalence regarding use of excise taxes, in 39% of staff documents it advised PRGT countries to collect such taxes especially on alcohol, tobacco and fuel. Regional Analysis: IMF advices the use of excise taxes most often in Europe in nearly 62 percent of consultations and negotiations. However, since there are only 3 European PRGT countries, it is worth noting that excise taxes were recommended in 43 percent of the 91 consultations and negotiations with governments from Sub- Saharan Africa. Corporate Income Tax (CIT): In 32 percent of the documents the IMF advised applying or increasing corporate income taxes (CIT), in light of the few other options available for taxation. The IMF s encouragement of increasing the formal sector in 32 percent of the documents (i.e., bringing more enterprises into the tax-paying category, especially professionals such as lawyers, accountants, professors, etc.) could also be interpreted as increasing business taxes. Illicit financial flows and transfer pricing issues were rarely discussed, only 7 percent and 1.3 percent of the time respectively. 7

10 Regional Analysis: In 43 percent of the 91 consultations and negotiations with Sub- Saharan Africa countries, the IMF provided advice on CIT. This is nearly double every other region, albeit for Europe. Illicit Financial flows were discussed the most (17 percent) with countries in the Western Hemisphere. Transfer pricing was only discussed with countries in the SSA and Asia-South Pacific regions. Personal Income Tax (PIT): Consistent with its determination that personal income tax is too complicated to apply and therefore not cost effective, the IMF only discussed PIT in 27 percent of its consultations and negotiations. When the Fund did provide advice on PIT it encouraged a progressive PIT schedule or framework only 40 percent of the time. While this advice should occur more frequently to be considered pro-poor, the IMF s limited advice for progressive PIT frameworks may reflect the limited capacity of each respective country and not necessarily neglect for promoting a progressive PIT. Trade Taxes: The IMF continues to encourage trade liberalization (as found in 27 percent of the PRGT country documents) but addressing the issue of how to recoup the loss of revenue from tariff reductions in discussed in just 7 percent of those documents. The IMF acknowledges that tariff reductions are a challenge for developing countries, especially when some countries depend on trade taxes for as much as 25 percent of their revenue. The IMF also recognizes that the VAT is not necessarily effective at replacing this lost revenue. Therefore, IMF suggests using a range of taxes, such as personal income tax. As state above, advice on PIT is not very frequent. However, in nearly 40 percent of the cases where the IMF encourages trade liberalization, it also advises countries to introduce or strengthen PIT. This demonstrates a fairly concerted effort by the IMF to help governments replace lost revenue. The IMF should increase its attention to this issue as such advice is missing in 60 percent of its consultations and negotiations. Regional Analysis: The IMF promotes trade liberalization the most in Asia-South Pacific (42 percent) and moderately in Europe (23 percent) and Sub Saharan Africa (29 percent). Discussions on how to address the loss of revenue from tariff reduction are absent in MENA and Western Hemisphere (0 percent) and rare in SSA (6 percent) and ASP (8 percent). However, this discussion is substantially more frequent in Europe (31 percent). Property Taxes: Despite its arguments in support of the progressivity of property taxes, the IMF only advises use of property taxes in 14.6 percent of PRGT country documents, mostly in Europe and Africa. 3. Evidence of IMF assessing the distributional impact of tax advice 8

11 Overall, there is very little evidence from public country documents of the IMF assessing the distributional impact of tax advice on poor households: the overwhelming emphasis continues to be on efficiency of tax collection and increasing the amount of revenue raised. To take one example of an area (VAT) where the Fund itself has warned about risks of regressivity and should be assessing or introducing measures with a positive distributional impact: there is no evidence of comprehensive PSIA-type analysis of introduction or sharp increases in VAT rates or excise duties, the IMF has been recommending a VAT threshold in just 5 percent of its consultation and negotiation documents; it has virtually never analyzed the impact of pro-poor VAT exemptions. On the whole, it seems that to the degree the Fund does consider these issues it relies on hypotheses suggested in the 2011 paper (as discussed in the introduction above), and does not account for the impact of tax policy on poor households. In addition, in all its literature, the IMF emphasizes that if spending is being made increasingly pro-poor, then any increase in tax revenues (whether or not this is designed in a pro-poor way) increase the pro-poor incidence of overall fiscal policy. So increasing the efficiency and effectiveness of tax collection can be pro-poor if spending is pro-poor, and effective in reducing poverty and inequality. However, most recent analysis (Oxfam 2011; Save the Children 2012; Government Spending Watch 2013) has shown only a very marginal (if any) trend to increased pro-poor spending. These weak findings make the specific impact of tax policy even more important for the Fund to analyze in future. The Great Unknown: IMF Technical Assistance All analysis in this report is based on information gathered from publicly available IMF documents. This analysis could be informed and greatly improved if IMF technical assistance to member-states which includes important technical advice on tax administration and policies were disclosed. The IMF s Transparency Policy which is to publish documents unless a country specifically requests otherwise applies to all country documents except for technical assistance documents. For TA documents, the policy is just the opposite: Countries must specifically request the disclosure of documents. 9

12 Conclusions and Recommendations: 1) AREAS OF STRONGER PRO-POOR IMPLEMENTATION: The most frequent explicitly pro-poor tax interventions by the IMF in its advice with PRGT countries have been in relation to corporate income tax (CIT) (32.3%). However, the composition of this advice has varied, with most focusing on issues around the rate and broadening its coverage, and only 12.7% of documents containing discussion of reducing incentives and holidays, &% of illicit flows and 1.3% of transfer pricing. This potentially indicates that IMF advice is not keeping up to date with the most important problems currently faced by developing countries which they have raised in relation to the BEPS process, and implies that more attention should be devoted to reducing incentives, and to combating illicit flows and transfer pricing, in IMF advice. Two other positive areas have been a focus on increasing transparency (46.8%) on revenue in the extractives sector; and on introducing or strengthening a large taxpayers office (LTO) (41.8%) to mobilize higher revenues from large corporations and HNWIs. 2) EQUITY-NEUTRAL AREAS: Advice to improve tax administration continues to be an IMF forte and included in 55.7% of documents. However, apart from the movement on LTOs (see above), none of this is explicitly pro-poor. It would be useful to see in IMF documents more explicit analysis of the capacity gaps in tax administrations, in relation especially to pro-poor taxes, and recommendations for focusing more personnel and resource on these areas. Many IMF programs contained advice on taxes which are often seen as equity-neutral such as excise duties (39.2%, especially on fuel, tobacco and alcohol) and trade tax liberalization (27.2%). It would be desirable to examine some of the incidence and other analysis conducted by other authors to reconfirm whether these are neutral or more could be done to make them pro-poor. In addition, the report finds that only 7% of the documents specifically proposed measures to offset revenue losses from trade liberalization which implies that more work should be being conducted in this area (thought the IMF could argue that all other measures achieve this goal). 10

13 There is a relatively low level of engagement (only 21.5%) on assisting countries to formalize the informal sector and encouraging it to pay tax. Given this is a major issue for virtually every developing country, more attention might be devoted to formalization in IMF advice. 3) SHORTCOMINGS IN PRO-POOR IMPLEMENTATION: The IMF s most frequent tax advice was for introducing or strengthening the VAT (58.2%), but almost all of this advice focused on increasing the rate or (in most cases reducing or eliminating) exemptions. Its potential most explicit pro-poor advice vis-à-vis VAT the setting of relatively high thresholds for registration was noteworthy for its absence: only 5 percent of the PRGT documents included discussions or advice on VAT thresholds. This was even more true in relation to the issues raised about the proequity effect of exemptions in LICs in the 2011 paper, with virtually no consideration of these issues. Each IMF document for countries with a VAT should refer to an explicit incidence/psia analysis and discuss the equity impact of threshold and any exemptions. The other notable shortcoming from the 2011 policy recommendations was the Fund s minimal advice on introducing or increasing property or wealth taxes (in only 15% of cases). Given large progressive revenue-raising potential in most countries, all Fund documents should contain explicit discussion of property and wealth taxes and their potential contribution to revenue. The degree of focus on mobilizing extra revenue from the extractives sector was also low (only 13.3%), and much lower than the focus on transparency. Especially as the IMF has done a lot of analytical work n this area and possesses a database of comparative tax rates, IMF documents should contain an explicit analysis of relative tax and royalty rates for natural resources sectors, especially for countries where these represent more than 10% of total revenue. Though documents indicate considerable discussion of personal income tax (PIT) ((27.8%), they show that only 11.8% of documents discussed its progressivity, and only 4.4% discussed exemptions or lower bands which might improve its equity. IMF documents could focus more on how progressive personal income tax is in each country, using comparative analysis. 11

14 4) CONSULTATION: Performance on consultation remains mixed, with only 30% of missions meeting parliament, 26% civil society and less than 10% other groups such as unions, academics and think tanks. Of course, documents do not indicate which issues were discussed in these consultations (tax or other) and whether local stakeholders were encouraged to provide policy inputs. Nevertheless, these findings indicate that the Fund should more systematically consult local stakeholders on policies and make clear the views of any key stakeholder groups on any controversial polices. Overall, these findings point to relatively weak implementation of the 2011 pro-poor policies described and promoted by the 2011 Revenue Mobilization in Developing Countries. However, the Fund maintains that it has been promoting pro-poor revenue increasing policies for many years (in all, not just PRGT eligible, countries) and that the relatively low incidence of pro-poor discussions in January 2012-July 2014 was because propoor policy recommendations were already in place. To verify these assertions and to better understand IMF pro-poor revenue policy advice in rhetoric and in fact, additional research would be desirable, encompassing all IMF member countries and IMF tax advice since APPENDIX I: IMF Policy Advice to PRGT Countries: Considerations for Poverty and Inequality REGION Sub Saharan Africa Poverty (# of times discussed in documents) Inequality (# of times discussed in documents) Average Most Consideration 44 (Ethiopia 2013 Art IV) 30 (Sierra Leone 2013 Art IV) Least Consideration Middle East Central Asia 0 (Benin 2012 LOI); 1 (3 cases) 0 (12 cases); 1 (13 cases) 12

15 Average Most Consideration 15 (Afghanistan 2014 Art IV) 12 (Afghanistan 2014 Art IV) Least Consideration Asia-South Pacific 1 (Kyrgyzstan 2012 LOI, Uzbekistan) 0 (Tajikistan 2012 Loan Review) Average Most Consideration Least Consideration Western Hemisphere 26 (Timor Leste 2013 Art IV) 0 (Papua New Guinea 2012 Art IV) 11 (Papua New Guinea 2013 Art IV, Timor Leste 2013 Art IV) 0 (Papua New Guinea 2012 Art IV) Average Most Consideration 28 (Nicaragua 2012 Art IV) 16 (Nicaragua 2013 Art IV) Least Consideration Europe 1 (Haiti 2012 Loan Review, Dominica 2012 Art IV) 0 (Haiti 2012 Loan Review, Dominica 2012 Art IV) Average Most Consideration 15 (Moldova 2014 Art IV) 12 (Georgia 2013 Art IV) Least Consideration 1 (Georgia 2012 LOI) 0 (Armenia 2013 Loan Review, Moldova 2012 LOI) TOTAL Average Considered 8 times per document Considered 4 times per document TOTAL Range Considered 0-40 times Considered 0-30 times Determining Level of Consideration for Poverty and Inequality And discussion or recommendation on the following were marked as positive consideration: poverty, poor or lowincome households/ citizens, distributional impact, PSIA, consumption basket, Millennium Development Goals And discussion or recommendation on the following were marked as positive consideration: equity, inequality, redistribution, inclusion, inclusive growth, GINI index, income/wealth gap APPENDIX II: 13

16 APPENDIX II: Frequency of IMF Advice on Tax Policy Indicators Tax Policy Indicators Middle East Central Asia Asia South Pacifi c Wester n Hemisp here Europ e Sub Sahara n Africa TOT AL Document # VAT Introduce/ Strengthen Percenta ges % VAT Threshold % VAT Level % VAT Rate % VAT Exemptions % Excise Taxes % Excise Alcohol % Excise Tobacco % Excise Lux. Goods % Excise Fuel % Excise Telecoms % Trade Tax liberalize Trade Tax: Rev loss % % Informal Sector % CIT Advise % CIT Rate % CIT incentives % CIT Broadening % CIT Illicit Flow % CIT Transfer- Pricing Resource Transparency Resource Tax Revenue % % % PIT % 14

17 Progressive PIT % PT Exemptions % Property Tax % Wealth Tax % LTO Promotion % Tax Admin Advice % Inclusion of Civil Society Inclusion of Academics Inclusion of Think Tank Inclusion of Parliament Inclusion of Trade/ Labor % % % % % APPENDIX III: Frequency of IMF Advice on Tax Policy Indicators: Regional Comparison Regional Comparison Middle East Central Asia Asia South Pacific Western Hemispher e Europe Sub Saharan Africa Document # VAT Introduce/ Strengthen 25.0% 57.7% 25.0% 53.8% 69.2% VAT Threshold 6.3% 7.7% 8.3% 0.0% 4.4% VAT Level 12.5% 7.7% 0.0% 7.7% 2.2% Vate Rate (Lower/ Increase) 18.8% 11.5% 0.0% 7.7% 8.8% VAT Exemptions 18.8% 23.1% 16.7% 7.7% 24.2% Excise Taxes 31.3% 26.9% 25.0% 61.5% 42.9% Excise Alcohol 6.3% 7.7% 25.0% 30.8% 8.8% Excise Tobacco 6.3% 11.5% 25.0% 38.5% 13.2% Excise Lux. Goods 0.0% 3.8% 0.0% 38.5% 6.6% Excise Fuel 0.0% 19.2% 8.3% 30.8% 22.0% 15

18 Excise Telecommunications 6.3% 0.0% 0.0% 0.0% 8.8% Trade Tax liberalize 6.3% 42.3% 16.7% 23.1% 28.6% Trade Tax: Rev loss 0.0% 7.7% 0.0% 30.8% 5.5% Informal Sector 0.0% 11.5% 16.7% 0.0% 31.9% CIT Advise 12.5% 23.1% 8.3% 38.5% 40.7% CIT Rate 6.3% 7.7% 0.0% 15.4% 19.8% CIT incentives 0.0% 3.8% 0.0% 7.7% 19.8% CIT Broadening 0.0% 7.7% 0.0% 23.1% 19.8% CIT Illicit Flow 6.3% 3.8% 16.7% 7.7% 6.6% CIT Transfer-Pricing 0.0% 0.0% 0.0% 0.0% 2.2% NR Transparency 25.0% 50.0% 100.0% 15.4% 47.3% NR increase/ decrease 0.0% 7.7% 8.3% 15.4% 17.6% PIT 0.0% 38.5% 25.0% 46.2% 27.5% Progressive PIT 6.3% 11.5% 0.0% 23.1% 12.1% PT Exemptions 0.0% 7.7% 0.0% 0.0% 5.5% Property Tax 0.0% 11.5% 8.3% 23.1% 17.6% Wealth Tax 0.0% 3.8% 0.0% 0.0% 26.4% LTO promotion 31.3% 42.3% 50.0% 30.8% 44.0% Tax Admin concern 50.0% 19.2% 66.7% 23.1% 70.3% Mtg Civil Society 18.8% 7.7% 0.0% 30.8% 35.2% Mtg Academics 0.0% 0.0% 0.0% 0.0% 6.6% Mtg Think Tank 0.0% 0.0% 0.0% 0.0% 3.3% Mtg Congress 6.3% 7.7% 66.7% 15.4% 38.5% Mtg Tade/Labor 0.0% 0.0% 0.0% 23.1% 13.2% APPENDIX IV: PRGT Countries & Level of Engagement with the IMF *organized by IMF regional divisions Sub-Saharan Africa Middle East & Central Asia Benin Burkina Faso Burundi Afghanistan Kyrgyz Republic Tajikistan 16

19 Cameroon Cape Verde Central African Republic Chad Comoros Congo, Democratic Republic Congo, Republic of Côte d'ivoire Djibouti Eritrea Ethiopia Gambia Ghana Guinea Guinea-Bissau Kenya Lesotho Liberia Madagascar Malawi Mali Mauritania Mozambique Niger Nigeria Rwanda São Tomé and Príncipe Senegal Sierra Leone Somalia South Sudan Sudan Tanzania Uzbekistan Yemen, Republic of Asia & Pacific Bangladesh Bhutan Cambodia Kiribati Lao P.D.R. Maldives Marshall Islands Micronesia Mongolia Myanmar Nepal Papua New Guinea Samoa Solomon Islands Timor Leste Tonga Tuvalu Vanuatu Vietnam Western Hemisphere Bolivia Dominica Grenada Guyana Haiti Honduras Nicaragua St. Lucia St. Vincent and the Grenadines Europe 17

20 Togo Uganda Zambia Zimbabwe Armenia Georgia Moldova Key: Determining level of Engagement with IMF Loan with IMF begins period Loan prior to 2012 Policy Support Instrument (PSI) Staff Monitored Program (SMP) 18