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Fixing the Great Distortion: How to Undo the Tax Bias Toward Debt Finance

By Ruud de Mooij, Michael Keen, and Alexander Tieman

“The Great Distortion.” That’s what The Economist, in its cover story of May 2015¸ called the systematic tax advantage of debt over equity that is found in almost every tax system.

This “debt bias” is now widely recognized as a real risk to economic stability. A new IMF study argues that it needs to feature more prominently on tax reform agendas; it also sets out options for how to do that.

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By | November 10th, 2016|Economic research, Finance, Fiscal policy, IMF, International Monetary Fund, Public debt|0 Comments
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Greece: A Credible Deal Will Require Difficult Decisions By All Sides

blanchBy Olivier Blanchard

(Versions in 中文, Français, ελληνικά, عربي, and Español)

The status of negotiations between Greece and its official creditors – the European Commission, the ECB and the IMF – dominated headlines last week.  At the core of the negotiations is a simple question: How much of an adjustment has to be made by Greece, how much has to be made by its official creditors?

In the program agreed in 2012 by Greece with its European partners, the answer was:   Greece was to generate enough of a primary surplus to limit its indebtedness.  It also agreed to a number of reforms which should lead to higher growth.  In consideration, and subject to Greek implementation of the program, European creditors were to provide the needed financing, and provide debt relief if debt exceeded 120% by the end of the decade.

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By | June 14th, 2015|Advanced Economies, Economic Crisis, Economic outlook, Economic research, Employment, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Multilateral Cooperation, Politics, Public debt, Reform|0 Comments
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Global Energy Subsidies Are Big—About US$5 Trillion Big

By Sanjeev Gupta and Michael Keen

(Versions in 中文, Français, 日本語, Русский and Español)

In their blog, Ben Clements and Vitor Gaspar make the points that global energy subsidies are still very substantial, that there is a strong need for reform in many countries, and that now is a great time to do it. This blog sets out what we mean by “energy subsidies,” provides details on their estimation, and explains how they continue to be high despite the recent drop in international energy prices (Chart 1).

Slide1

Our latest update of global energy subsidies shows that “pre-tax” subsidies—which occur when people and businesses pay less than it costs to supply the energy—are smaller than a few years back. But “post-tax” subsidies—which add to pre-tax subsidies an amount that reflects the environmental, health and other damage that energy use causes and the benefit from favorable VAT or sales tax treatment—remain extremely high, and indeed are now well above our previous estimates.

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By | May 18th, 2015|Finance, Globalization, IMF, International Monetary Fund, Reform, Uncategorized|0 Comments
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No Country is an Island: Ireland and the IMF

Speaking to the pain and anger of the Irish people at the toll the economic adjustment has taken on their daily lives, the IMF’s mission chief Ajai Chopra was clear during a press conference today in Dublin: the end goals is to protect the poor and most vulnerable people in society while restarting the economy. The IMF along with the European Central Bank and the European Commission were in the emerald isle for the regular quarterly review of the government’s economic program.

By | July 14th, 2011|Economic Crisis, Europe, Fiscal policy, growth, IMF, International Monetary Fund|8 Comments
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