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Mr. Ricardo Fenochietto
This paper analyses and compares two different groups of tools, the first to encourage the use of invoices (or payment systems) and the second to refund the VAT to low-income individuals. The analysis contributes to the existing literature by providing a clear characterization between these two groups of tools that are too often misunderstood and offers clear guidance to policymakers on the benefits and pitfalls of them based on available empirical studies and novel data analysis. Briefly, the first group includes a set of regressive and distortive tools (such as, allowing deducting the VAT paid on personal consumption from the PIT and reducing the VAT rate for using electronic means of payments or registration), while the second group includes tools that are less distortionary and improve income distribution (tax credits and VAT rate reduction targeted only at low-income individuals). This paper also finds that allowing the deduction of personal consumption against the PIT’s taxable base (i) did not impact positively the VAT revenue in Guatemala and (ii) worsens the income distribution in Ecuador.
International Monetary Fund. Middle East and Central Asia Dept.

. Additionally, the tax and contribution burden on employees is already high, and any rate increase may further burden those who are now paying high taxes. The PIT base may be expanded instead by taxing non-wage sources of personal income, including capital income from interest, dividends, and capital gains. These income sources are more likely to be received by high income individuals. Currently in Kazakhstan, although some capital income is taxable, exemptions allow most of it to go untaxed. Dividends that are not already exempt are taxed at a lower 5 percent rate. 19. An

Mr. Howell H Zee

References Tables 1. Comparative Features of the Income Tax Systems in the Nordic Countries, 2002 2. Selected OECD Countries: PIT Revenue, 1986-2002 3. Selected OECD Countries: PIT Revenue by Level of Government, 2000 4. Selected OECD Countries: Structure of Tax Revenue, 1986-2002 5. Selected OECD Countries: PIT Rate Structure and Basic Allowance, 1986 and 2002 6. Selected OECD Countries: Aggregate Maximum Marginal Tax Burden on Wages, 2002 7. Selected OECD Countries: PIT Treatment of Capital Income, 2002 8. Selected OECD Countries: Aspects of the PIT

International Monetary Fund

compliance might raise something in the order of an additional 2 percent of GDP; Establishing a broad-based corporate income tax, at rates competitive by international standards—more has been done on the latter than on the former, leaving signs of significant scope for base-broadening in many lower-income countries; Extending the PIT base, and ensuring a coherent treatment of alternative forms of capital income—still a major challenge; Levying excises on a few key items that are adequate to revenue needs and wider social concerns—these too have further potential in