Fiscal Devaluation and Fiscal Consolidation
AbstractThis paper focuses on two core tax design issues that arise in addressing current fiscal challenges. It first explores the idea, prominent in troubled Eurozone countries, of a "fiscal devaluation": shifting from social contributions to the VAT as a way to mimic a nominal devaluation. Empirical evidence is presented which suggests that in Eurozone countries this may indeed improve the trade balance in the short-run, though, as theory predicts, the effects eventually disappear. The paper then assesses the wider scope for VAT reform in meeting fiscal consolidation needs, developing and beginning to apply a methodology for finding additional VAT revenue in ways less distortionary and fairer than further raising the standard rate.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 12/85.
Date of creation: 01 Mar 2012
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This paper has been announced in the following NEP Reports:
- NEP-ACC-2012-04-23 (Accounting & Auditing)
- NEP-ALL-2012-04-23 (All new papers)
- NEP-EEC-2012-04-23 (European Economics)
- NEP-PBE-2012-04-23 (Public Economics)
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