Publication: Taxation of Financial Intermediation : Theory and Practice for Emerging Economines
Loading...
Published
2003
ISSN
Date
2013-08-16
Author(s)
Editor(s)
Abstract
This volume examines the possibilities and pitfalls to successful financial sector tax reform from theoretical, empirical and practical perspectives. It explores the possibilities and limitations of "big ideas" such as removal of all capital income taxation, the application of VAT to financial services or heavy reliance on financial transactions taxes. The risks of attempting to use financial sector taxes as corrective instruments are stressed. Two defensive criteria are advanced as key: making the financial tax system as arbitrage- and inflation-proof as is practicable. Each commissioned essay develops a distinct aspect of the area. Theoretical chapters model the impact of taxes on intermediaries, the design of optimal tax schemes, the role of imperfect information and the relationship with saving. Current practice in the industrial world and case studies of distorted national systems provide an empirical underpinning. Finally, experience with several of the main practical issues is discussed in chapters ranging from the income tax treatment of intermediary loan-loss reserves, the VAT, financial transactions taxes, deposit insurance and inflation. Contributors are distinguished academics and practitioners.
Link to Data Set
Citation
“Honohan, Patrick. Honohan, Patrick, editors. 2003. Taxation of Financial Intermediation : Theory and Practice for Emerging Economines. © World Bank. http://hdl.handle.net/10986/15122 License: CC BY 3.0 IGO.”
Digital Object Identifier
Associated URLs
Associated content
Other publications in this report series
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Avoiding the Pitfalls in Taxing Financial Intermediation(World Bank, Washington, DC, 2003-05)Enthusiasts for financial sector tax reform typically come either with some form of "flat tax" (including value added tax on financial services, zero taxation on capital income, or a universal transactions tax) or advocating corrective taxes designed to offset market failures or achieve other targeted objectives. As a result the tax systems in most countries often end up with a complex mixture. Honohan argues that practical policy for taxation of the financial sector needs to take into account two key features of the sector: its capacity for arbitrage and its sensitivity to inflation and thus to nonindexed taxes. Where these aspects have been neglected, poorly constructed tax systems-whether the consequence of a drive for revenue or of misdirected sophistication-often have sizable unexpected side effects. A defensive stance making the minimization of such distortions as its cornerstone is the best policy.Publication Financial Intermediation in the Pre-Consolidated Banking Sector in Nigeria(World Bank, Washington, DC, 2007-06)This paper uses unique bank-by-bank balance sheet and income statement information to investigate the intermediation efficiency in the Nigerian pre-consolidated banking sector during 2000-05. The author analyzes whether the Central Bank of Nigeria's policy of recent banking consolidation can be justified and rationalized by looking at the determinants of spreads. A spread decomposition and panel estimations show that the reform of the banking sector could be the first step to raise the intermediation efficiency of the Nigerian banking sector. The author finds that larger banks have enjoyed lower overhead costs, increased concentration in the banking sector has not been detrimental to the spreads, both increased holdings of liquidity and capital might have led to lower spreads in 2005, and a stable macroeconomic environment is conducive to a more efficient channeling of savings to productive investments.Publication Capital Requirements and Business Cycles with Credit Market Imperfections(2009-12-01)The business cycle effects of bank capital regulatory regimes are examined in a New Keynesian model with credit market imperfections and a cost channel of monetary policy. Key features of the model are that bank capital increases incentives for banks to monitor borrowers, thereby reducing the probability of default, and excess capital generates benefits in terms of reduced regulatory scrutiny. Basel I and Basel II-type regulatory regimes are defined, and the model is calibrated for a middle-income country. Simulations of supply and demand shocks show that, depending on the elasticity that relates the repayment probability to the capital-loan ratio, a Basel II-type regime may be less procyclical than a Basel I-type regime.Publication Mongolia - Government Financial Sector Reform Program (2000-2010) : Mid-term Review Report(Washington, DC, 2006)In spring 2000 the Government of Mongolia adopted a Long-Term Vision and Medium Term Strategy for Financial Sector Reform and Development in 2000-2010, and implemented the Medium Term Strategy in 2001-2004 under the framework of the Bank s FSAC and ADB s FSPL II. In 2004-2005, a Bank team carried out a series of reviews to take stock of the progress made, and identify the remaining as well as emerging challenges. The reviews enjoyed support and coordination from the Ministry of Finance, the Bank of Mongolia and various financial institutions in Mongolia. The data used for the reviews were mainly those at the end of 2004, some were as recent as June 2005 and beyond. The main findings and recommendations of the reviews are summarized in this report, which serves as an Issues Paper for Bank management and staff working on or interested in Mongolia.Publication Nepal Economic Update, April 2014(Washington, DC, 2014-04)The enabling environment for the development of Nepal has improved, but opportunities need to be effectively leveraged through focused policy action. Nepal has significant resources in the form of remittances from abroad, but the economy cannot use these resources in a productive manner to enhance the overall welfare of all citizens. Specific priorities for development include: (1) creating a growth promotion vision and agenda; (2) resolution of Nepal's "fiscal paradox"; (3) boosting investments; and (4) tackling enduring financial sector risks and managing excess. After a difficult year in FY13, the economy is poised to recover, albeit modestly. In FY13, Nepal achieved only modest growth of 3.6 percent. This was due largely to poor performance of the agricultural sector as well as very modest levels of industrial activity. Nepal s internal and external balances are sound but not for the right reasons. Low expenditure and robust revenue growth accounted for a large budget surplus and declining debt. Nepal s external position is comfortable because of large remittance inflows. On the external side, Nepal has benefited from the depreciation of the rupee but also - and much more significantly - from a sharp further increase in inward remittances which are expected to amount to over 30 percent of GDP in FY14. Monetary policy has sought to achieve a delicate equilibrium between controlling inflation and supporting economic activity but the optimal balance may evolve and call for corrections. For FY14, the outlook is cautiously optimistic. As remittances have become a defining feature of the Nepali economy the country must learn to manage excess liquidity.
Users also downloaded
Showing related downloaded files
Publication Digital Africa(Washington, DC: World Bank, 2023-03-13)All African countries need better and more jobs for their growing populations. "Digital Africa: Technological Transformation for Jobs" shows that broader use of productivity-enhancing, digital technologies by enterprises and households is imperative to generate such jobs, including for lower-skilled people. At the same time, it can support not only countries’ short-term objective of postpandemic economic recovery but also their vision of economic transformation with more inclusive growth. These outcomes are not automatic, however. Mobile internet availability has increased throughout the continent in recent years, but Africa’s uptake gap is the highest in the world. Areas with at least 3G mobile internet service now cover 84 percent of Africa’s population, but only 22 percent uses such services. And the average African business lags in the use of smartphones and computers as well as more sophisticated digital technologies that catalyze further productivity gains. Two issues explain the usage gap: affordability of these new technologies and willingness to use them. For the 40 percent of Africans below the extreme poverty line, mobile data plans alone would cost one-third of their incomes—in addition to the price of access devices, apps, and electricity. Data plans for small- and medium-size businesses are also more expensive than in other regions. Moreover, shortcomings in the quality of internet services—and in the supply of attractive, skills-appropriate apps that promote entrepreneurship and raise earnings—dampen people’s willingness to use them. For those countries already using these technologies, the development payoffs are significant. New empirical studies for this report add to the rapidly growing evidence that mobile internet availability directly raises enterprise productivity, increases jobs, and reduces poverty throughout Africa. To realize these and other benefits more widely, Africa’s countries must implement complementary and mutually reinforcing policies to strengthen both consumers’ ability to pay and willingness to use digital technologies. These interventions must prioritize productive use to generate large numbers of inclusive jobs in a region poised to benefit from a massive, youthful workforce—one projected to become the world’s largest by the end of this century.Publication Taxes, Spending, and Equity: International Patterns and Lessons for Developing Countries(Washington, DC: World Bank, 2025-11-17)Taxes and public spending underpin the basic administration of government and finance the human capital and infrastructure investments needed for economic growth. They can also have a significant and immediate impact on poverty and inequality. The question of how public finance can support longer-term growth objectives while promoting equity has become even more important in recent years, given the high fiscal deficits and debt levels most countries emerged with in the aftermath of the COVID-19 pandemic. These included the increasing cost of debt and the need to restart environmentally sustainable growth while helping households address the learning losses and other social scars caused by the pandemic. This paper examines the global evidence on which households pay which taxes and who benefits from what spending, and critically, the net effect on different households across the income distribution. The aim is to identify the patterns and lessons that emerge for designing progressive fiscal policies. A global dataset of 96 countries is assembled, spanning all regions of the world and all national income levels, grounded in the Commitment to Equity (CEQ) approach to fiscal incidence.Publication Kyrgyz Republic Country Climate and Development Report(Washington, DC: World Bank, 2025-11-03)This Country Climate and Development Report (CCDR) on the Kyrgyz Republic aims to support the country’s development goals amid a changing climate. The CCDR considers two policy scenarios up to 2050: the business-as-usual (BAU) and high-growth scenarios. As it quantifies the likely impacts of climate change on the Kyrgyz economy between now and 2050, the report highlights key government actions to best prepare for and adapt to climate impacts (referred to as “with adaptation” measures), with a particular focus on the time horizon up to 2030. The CCDR also outlines a path to net zero emissions by 2050 (referred to as “with mitigation” measures, “decarbonization,” or, simply, “net zero 2050”), highlighting associated development co-benefits.Publication Continental Drying: A Threat to Our Common Future(Washington, DC: World Bank, 2025-11-04)Grounded in new evidence from satellite data, “Continental Drying: A Threat to Our Common Future” presents the first global assessment of freshwater reserves over the past two decades. The findings expose an alarming trend of “continental drying,” a persistent long-term decline in freshwater availability across vast landmasses. Not only are droughts and deluges becoming more unpredictable, but the total amount of freshwater available for use has also significantly declined. Continental drying, driven by global warming, worsening droughts, and unsustainable water and land use, is a silent but accelerating crisis—largely unknown to the public—that reshapes the global water narrative. Continental drying raises profound risks. This report reveals new empirical evidence showing how freshwater depletion leads to major job losses, reduced incomes, wildfires, and biodiversity threats. In the long term, the combined effects of drying and warming could push societies toward a tipping point where damage accelerates rapidly and adaptation becomes increasingly difficult. Against the backdrop of continental drying, global water consumption rose by 25 percent between 2000 and 2019, with about a third of this increase occurring in regions already experiencing drying. Compounding the pressure, a substantial share of water use in drying regions remains inefficient. Continental Drying identifies hot spots where rising demand and declining supply converge and explores where and how water savings can be realized. This report recommends a three-pronged approach to address the crisis: managing demand, augmenting water supply, and improving water allocation. Five cross-cutting levers—strengthening institutions, reforming water tariffs and repurposing subsidies, adopting water accounting, leveraging data and technological innovations, and valuing water in trade—are essential for effective implementation and to attract private investment to finance the approach. Beyond water, addressing trade barriers, investing in education and skills development, and improving access to markets and financial services are critical for strengthening job and livelihood resilience amid a continental drying crisis.Publication Direct and Indirect Impacts of Transport Mobility on Access to Jobs: Evidence from South Africa(Washington, DC: World Bank, 2025-11-12)Access to jobs is essential for economic growth. In Africa, unemployment rates are notably high. This paper reexamines the relationship between transport mobility and labor market outcomes, with a particular focus on the direct and indirect effects of transport connectivity. As predicted by theory, wages are influenced by the level of commuting deterrence. Generally, higher earnings are associated with longer commute times and/or higher commuting costs. Local accessibility is also important, especially for individuals with time constraints. Both direct and indirect impacts are found to be significant in South Africa, where job accessibility has been challenging since the end of apartheid. For the direct impact, the wage elasticity associated with commuting costs is significant. Returns on commute are particularly high for women. Local accessibility to socioeconomic facilities, such as shops and health services, is also found to have a significant impact, consistent with the concept of mobility of care. To enhance employment, therefore, it is crucial to connect people not only to job locations but also to various socioeconomic points of interest, such as markets and hospitals, in an integrated manner. This integration will enable individuals to spend more time working and commuting longer distances.