Other Public Sector Study

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Reducing Tobacco Use Through Taxation in the Russian Federation: A Modelled Assessment of Two Policy Options
(World Bank, Washington, DC, 2018-10-01) World Bank Group
This report presents results of the modelling exercise in terms of excise tax increases for the period 2018–2021, including average excise tax and revenue mobilization options; it also compares the tobacco excise tax already included in the country's current tax code with that necessary to achieve proposed EU minimum rates by 2021 (Minimum EU excise tax rates scenario).
Ethiopia: Modelling the Impact of Tobacco Tax Policy Reforms on Tobacco Use and Domestic Resources Mobilization Under Different Scenarios
(World Bank, Washington, DC, 2018-01-23) World Bank Group
As part of the ongoing tax policy dialogue with the Government of Ethiopia, the World BankGroup organized a workshop in Addis Ababa, on June 20, 2016, to discuss tobacco use, its healthimpact, and excise taxes on tobacco as a public policy measure to reduce tobacco use, and hencethe risk of ill health, premature mortality, and disability due to tobacco-related diseases, andmobilize additional domestic resources to expand the fiscal capacity of the government, inaccordance with the Financing for Development Addis Ababa Action Agenda. This event wasattended by officials from the Ministry of Health (MOH) and Ministry of Finance & EconomicCooperation (MoFEC). Ethiopia's Health Sector Transformation Plan 2015-2020 lists noncommunicable diseases (NCDs) as one of the major public health challenges facing the country. As in the rest of sub-Saharan Africa, NCDs are expected to become the leading cause of ill health and death by 2030, influenced by rapid urbanization, rapid per capita economic growth, increase in behavioral risk factors (most NCDs are the result of tobacco use, physical inactivity, unhealthy diet, and/or the harmful use of alcohol), and improvements in the control of infectious diseases that increase life expectancy. As NCDs have become a major health burden in the country, the Government has put in place ambitious targets to reduce the prevalence of the main health risk factors associated with the onset of NCDs among the population. The strategy focuses on increasing prevention and control of the main risk factors: tobacco use and alcohol abuse, physical inactivity and unhealthy diet, which contribute to about 80 percent of NCDs.
Assessment of Tax Compliance Costs for Businesses in the Republic of Tajikistan
(Washington, DC, 2017-12) International Finance Corporation
The principal outcome of the tax reform implemented in recent years in the Republic of Tajikistan is the reduction of administrative burden on the private sector associated with compliance with tax legislation through simplified tax procedures and less time required to pass these procedures. The International Finance Corporation (IFC), a member of the World Bank Group, is the largest global development institute, which is focused on support to the private sector in emerging economies. The objective of the IFC Central Asia Tax Project is to improve compliance with mandatory requirements of tax legislation through better transparency and simplification of tax administration procedures. IFC through its technical assistance tax reforms projects, has conducted a series of studies, which allow to monitor the tax system reforming processes in Tajikistan. The main goal of the studies was a periodic assessment of time and costs of taxpayers in Tajikistan to comply with the mandatory requirements of the tax legislation. As part of the study, three rounds of measurements were performed, where the tax administration costs of the Tajik taxpayers were assessed at a regular time span - in 2012, 2014, and 2016. This report presents the results of all three rounds of business environment surveys in the area of tax regulation. It includes the estimates of tax accounting costs of taxpayers in Tajikistan in 2012, 2014, and 2016.
Assessment of Tax Compliance Costs for Businesses in the Kyrgyz Republic
(World Bank, Bishkek, 2017-12) World Bank Group
The International Finance Corporation (IFC), a member of the World Bank Group, is the largest global development institute focused on supporting the private sector in emerging economies. Through its work with more than 2,000 companies worldwide, IFC mobilizes capital, expertise, and influence to create markets and opportunities for developing countries. The objective of the IFC Central Asia Tax Project is to improve compliance with mandatory requirements of tax legislation through increased transparency and simplification of tax administration procedures. Simplification of tax accounting procedures will reduce costs of tax compliance, lessen the administrative burden on small and medium businesses, reduce barriers to entry into the formal economy, and serve as a driver for economic growth in the Kyrgyz Republic. The key element of reforms is an immediate assessment of their efficiency and possibility for adjustments based on assessment results. With this view, IFC, through its technical assistance tax reforms projects, has conducted a series of studies, which help monitor the tax system reforming processes in the Kyrgyz Republic. The main goal of the studies was a periodic assessment of time and costs to taxpayers in the Kyrgyz Republic in complying with the mandatory requirements of the tax legislation. Equitable intervals of measurements allowed an immediate assessment of the impact of implemented tax reforms on the cost of taxpayers to comply with tax legislation. In addition, actual data on the tax system status helped elaborate concise recommendations for the Government with the focus on elimination of identified issues and reduction of the tax administration costs to businesses. This report outlines the results of all three rounds of business environment surveys in the area of tax regulation; it includes the estimates of tax accounting costs of taxpayers in the Kyrgyz Republic in 2012, 2014, and 2016.
Kazakhstan: Enhancing the Fiscal Framework to Support Economic Transformation
(World Bank, Washington, DC, 2017-11-27) World Bank
Kazakhstan benefited from the oil boom of 2000–14 that led to income growth and poverty reduction and helped build a fiscal cushion to stabilize the economy during downturns. During this period, nominal GDP per capita increased ten-fold, from US$1,229 in 2000 to US$12,807 in 2014, mainly due to price effects from currency appreciation that followed an expansion of the oil sector. Income growth led to a substantial decline in the poverty rate, from 77 percent in 2001 to 16 percent in 2014. As oil output more than doubled and the oil price super-cycle emerged, the Government of Kazakhstan (GoK) accumulated substantial fiscal savings in its oil fund, the National Fund of the Republic of Kazakhstan (NFRK).2 Fiscal savings in the NFRK peaked at US$73 billion (33 percent of GDP) at end-2014. A portion of these funds was used for anti-crisis programs in 2007-10, during which time the fiscal stimulus program totaled US$18 billion (about 15 percent of GDP). The authorities must urgently adopt and start implementing a fiscal consolidation strategy and refocus macro-fiscal policy on promoting diversified growth and high-quality job creation. The countercyclical fiscal stance adopted in 2014 led to an increase in the nonoil fiscal deficit (NOD), which is too high to ensure medium-term fiscal sustainability and threatens the long-term growth potential of the nonoil tradable economy. Successful fiscal consolidation would require: (i) reducing inefficient expenditure that distorts private incentives while redirecting savings toward productivity-enhancing spending; and (ii) eliminating inefficient tax benefits that result in an uneven playing field for investment. While pursuing a fiscal consolidation effort over the medium term, there are potential benefits to reviewing Kazakhstan’s fiscal policy framework and institutions with the goal of strengthening their coherence, credibility, and flexibility. This Public Finance Review (PFR) aims to help the authorities identify areas for fiscal consolidation that will bring about fiscal sustainability in the medium term and support economic transformation in the long run. While developing a fiscal consolidation strategy, the authorities should address four policy areas to enhance fiscal sustainability and support economic transformation. These are discussed in the following four policy focus chapters: (i) enhancing the credibility of the fiscal policy framework; (ii) improving public spending efficiency and effectiveness; (iii) mobilizing nonoil revenue and optimizing the tax system; and (iv) strengthening fiscal policy institutions.
Formal Informality: Informal Practices of Formal Firms as a Key Business Constraint
(World Bank, Washington, DC, 2017-10) World Bank Group
Despite strong economic growth in recent decades led by the resource-based sectors, Lao PDR facessignificant challenges, including high poverty rates and limited productivity. A highly challenging business and investment environment continues to hamper stronger private sector-led growth, especially outside the natural resource sectors, where job creation could be larger. In the still largely unreformed business and trade environment, the World Bank’s 2016 Enterprise Survey identified "practices of firms in the informal sector" as the biggest problem reported by firms in the country, and addressing these and other challenges fundamentally will be critical to generate inclusive growth. Based on interviews with business owners and top managers, this note finds that there are four main types of problematic informality in Lao PDR’s business environment: inadequately registered enterprises that "fly under the radar"; widespread tax evasion; irregular adherence to complex and burdensome regulations; and a culture of noncompliance with basic rules and standards. Fully registered and formalized firms incur higher costs and feel unfairly targeted by authorities who are eager to collect revenue and fulfil their mandates. Unregistered or rule-evading competitors are alleged to escape the same level of scrutiny, due to the difficulty of enforcement and prevalence of petty corruption. Tackling problematic informality in the business environment will require stronger institutions and a continued government focus on eliminating petty corruption. In the near-term, this note recommends eliminating unnecessary regulations and streamlining others by leveraging public support for transparency and consistency in the tax and regulatory systems. This should be complemented by a functional, efficient one stop window for enterprise registration to encourage formalization. Putting these recommendations into practice will require improved monitoring, evaluation, and assessment practices based on reliable and timely common data.
Regressive or Progressive?: The Effect of Tobacco Taxes in Ukraine
(World Bank, Washington, DC, 2017-09-27) Fuchs, Alan; Meneses, Francisco
Tobacco taxes are usually considered regressive as the poorest individuals allocate larger shares of their budget towards the purchase of tobacco related products. However, because these taxes also discourage tobacco use, some of the most adverse effects and their economic costs are reduced, including lower life expectancy at birth, higher medical expenses, increased years of disability among smokers, and the effects of secondhand smoke. This paper projects the effects of an increase in the tobacco tax on household welfare in Ukraine. It considers three price-elasticity scenarios among income deciles of the population. Results show that although tobacco taxes are often criticized for being regressive in the short-run, a more comprehensive scenario that includes medical expenses and working years, the benefits of tobacco taxes far exceed the increase in tax liability, benefitting in large measure lower income households. Our results also indicate that lower health expenditure seems to be the main driver because of the reduction in tobacco-related diseases that require expensive treatments. Tobacco taxes are also associated with positive distributional effects related to the higher long-term price elasticities of tobacco consumption.
Latvia Tax Review
(World Bank, Washington, DC, 2017-06-28) World Bank
Latvia’s Ministry of Finance requested the World Bank to collaborate on a review of the country’s tax system as input for the design a medium-term tax strategy. The motivation behind the tax review is to find options to increase tax revenues by three percentage points of GDP to reach a target tax-to-GDP ratio of 33 percent in the medium term.1 In Latvia, tax revenues are lower than predicted for its income level and institutional development. Latvia’s tax policy needs to be restructured to support economic development and raise living standards. The speed of convergence in Latvia to average income levels in the European Union (EU) was impressive until the 2008-2009 crisis, but since then output recovery has been fast but not rapid enough for real GDP to return to pre-crisis level. A critical challenge then is to boost productivity growth in the economy: the level of productivity is low relative to OECD economies and its growth has slowed notably since the crisis. Increasing labor productivity is particularly important if overall productivity is to rise: informality and inactivity reduce both labor activity and productivity. Increased investment in skills and good health are an important part of the labor productivity and participation story—particularly as Latvia rapidly ages. But reducing the reliance of the tax system on low-skilled labor is also a key policy challenge. Latvia’s tax system puts substantially more of a burden on labor compared to capital or consumption. This is all the more concerning given that wages for much of the population are low and so the current flat income tax structure has implications for social inclusion and poverty. Inequality of (after-tax) disposable income in Latvia is one of the highest in the EU, with only Bulgaria, Romania and Lithuania having higher inequality. The tax system entails distributional choices and one of the objectives of the review is to look at options to improve the equity of the system. Here both vertical equity, i.e. taxing less those of lower income, and horizontal equity, i.e. taxing the same those in economically similar situations, are of importance. Governments are inevitably confronted with an equity-efficiency trade-off: higher taxes on the richer parts of the population, to raise revenue and to finance benefits for poorer groups, can distort the economic incentives for work, entrepreneurship, saving and risk-taking of middle- and higher-income individuals. At the same time, redistribution to low-income individuals, through tax credits or benefits, could weaken labor supply incentives. On the other hand, fairness, or equity is an important consideration for widespread acceptance and sustainability of the tax system.
Peru - Selected Issues in Fiscal Policy: Taxation and Equity
(World Bank, Washington, DC, 2015-06-11) Junquera-Varela, Raúl Félix; Vostroknutova, Ekaterina
This report takes an in-depth look, from a policy perspective, at the trade-offs between increasing tax collection and improving the equity of the fiscal system. As part of this effort, the report places the Peruvian tax system in an international context and considers the key challenges the government is facing in its drive to increase revenue. It also conducts qualitative and quantitative analyses of the impact of taxes and transfers on inequality and on the distribution of income. The report then makes several policy proposals that would increase tax collection without jeopardizing equity, and it then simulates the impacts of these changes on collection and equity. This advice spanned the 2012-2014 period, and included research on several tax policy-related issues, such as legal advice on double-taxation treaties and in-depth analyses of tax exemptions. To keep the focus tight, some of the work is not included in this report. Contributions were originally written in Spanish to provide the Ministry of Economy and Finance (MEF) with timely advice on the subject and were discussed with the counterparts during and immediately after its preparation. As a result of prioritizing this process, two teams focused on different areas of research and were able to contribute to the analytical base behind the ongoing tax reform. The report summarizes the main elements of this process and resulting advice. It comes out at the same time as the finance ministry announces the first set of tax reforms that were informed by this work.