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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.
Mr. Ricardo Fenochietto

addition small taxpayers are registered in special scheme exempted from the VAT (see Box 1). This is very important when determining the level of the VAT refund. Box 1. The VAT Impact on Low-Income Individuals in LICs and EMEs As highlighted in IMF 2019 , in practice, the VAT may not be as regressive as often supposed . Not only because of exemptions or the use of reduced tax rates on food and other goods that make up the consumption basket of low-income individuals but also because in LICs and EMEs most of the purchases happen in informal markets or are bought

Mr. Ricardo Fenochietto

Creditable to all Taxpayers with Limits IV. Conclusions and Policy Recommendations References Box 1. The VAT Impact on Low Income Individuals in LICs and EMEs Figures 1. Bolivia, PIT (VCR) Revenue 2. VAT Revenue and VAT Non-Compliance (2008–2018) 3. Imports and VAT Revenue (2008–2018) Tables 1. Countries with VAT as a Credit or Deduction to the PIT 2. PIT and Tax Revenue by Group of Countries 3. Ecuador – The Revenue and Equity Impacts of Eliminating the PIT deduction allowed for Personal Expenses 4. Ownership of Financial Accounts and

International Monetary Fund. Asia and Pacific Dept

Reform ,” OECD Economics Department Working Papers 231 , OECD Publishing . De Mooij , R. and I. Saito , 2014 , “ Japan’s Corporate Income Tax: Facts, Issues and Reform Options ,” IMF Working Paper WP/14/138 . Fenochietto , R. and Benitez , J. C , 2021 , “ Encouraging Formal Invoicing and Reducing the VAT Impact on Low-Income Individuals ,” IMF Working Paper No. 2021/040 . Honda , K. , 2016 , “ Reform of Real Asset Tax ,” Tax Payment Associations (in Japanese) . International Monetary Fund , 2021a , Fiscal Monitor: A Fair

Maria Delgado Coelho
The excessive complexity and burden of the Brazilian tax system, riddled by cumulative indirect taxes and heavy payroll contributions, have led to an accumulation of fiscal incentives aimed at reducing its burden on taxpayers and productive activities. Federal and subnational tax expenditures currently stand at over 5 percent of GDP. Rationalizing them can only be comprehensively feasible in the context of a broader sequenced tax reform, and could reduce resource misallocation and income inequality, as well as provide new revenues.
Maria Delgado Coelho

. Borges , Bráulio , 2020 . “ Impactos macroeconômicos estimados da proposta de reforma tributária consubstanciada na PEC 45/2019 ”. Centro de Cidadania Fiscal (CCiF) technical note. February . Fenochietto , Ricardo and Juan Carlos Benítez , 2021 . “ Encouraging Formal Invoicing and Reducing the VAT Impact on Low-Income individuals ”, IMF Working Paper No. 2021/040 . Receita Federal do Brasil (RFB) , 2020 . Demonstrativo de Gastos Tributários – Projeto de Lei Orçamentária Anual . Receita Federal do Brasil (RFB) , 2021 . Demonstrativo de

Mr. Santiago Acosta Ormaechea, Samuel Pienknagura, and Carlo Pizzinelli
This study provides an overview of tax structures in LAC before the COVID-19 pandemic, compares it to OECD countries, and provides recommendations for growth-friendly and inclusive tax policy reforms. LAC countries collect significantly lower tax revenue relative to OECD countries and have tax structures that rely excessively on corporate-income taxes (CIT) while personal-income taxes (PIT) remain largely underutilized. LAC countries could strengthen their PIT to mobilize revenue and improve progressivity by addressing critical design flaws. Possible adverse growth effects could be mitigated by providing incentives to labor force participation and formalization (e.g., through earned-income tax credits). The ongoing global corporate income tax reforms present a great opportunity to reassess thoroughly the CIT in LAC. Specifically, reforms would need to focus on aligning CIT statutory rates with those of other regions—when assessed to be relatively high—to attract investment and alleviate profit shifting, and on broadening the corporate tax base. Value-added taxes (VAT) could be improved by tackling exemptions and reduced rates. Furthermore, while estimates of additional revenue from levying the VAT on the digital economy appear modest, taxing this sector as others in the economy is critical to avoid further tax base erosion.
Mr. Santiago Acosta Ormaechea, Samuel Pienknagura, and Carlo Pizzinelli

– 637 . Eissa , N. , and H. Williamson Hoynes . 2004 . “ Taxes and the Labor Market Participation of Married Couples: The Earned Income Tax Credit .” Journal of Public Economics , Vol. 88 , No. 9 -10, pp. 1931 – 1958 . EYGM Limited (EYGM) . 2020 . Worldwide Personal Tax and Immigration Guide, 2019–20 . The Bahamas : EYGM Limited . Fenochietto , R. , and J. C. Benítez . 2021 . “ Encouraging Formal Invoicing and Reducing the VAT Impact on Low-Income Individuals .” IMF Working Paper 21/40 , Washington, DC . Fernández , C