"Fiscal Devaluation" and Fiscal Consolidation: The VAT in Troubled Times

Ruud de Mooij; Michael Keen

"Fiscal Devaluation" and Fiscal Consolidation: The VAT in Troubled Times

Ruud de Mooij & Michael Keen

Published Date June 2013

ISBN 9780226018447

Book: Fiscal Policy after the Financial Crisis

Book editors: Alberto Alesina & Francesco Giavazzi

PUBLISHER: University of Chicago Press

This chapter discusses the tax side of fiscal adjustments. It first explores the idea, prominent in troubled Euro area countries, of a "fiscal devaluation"--that is, shifting from social contributions to the value added tax (VAT) as a way to mimic a nominal devaluation. The chapter then assesses the wider scope for using a VAT to achieve a fiscal consolidation.

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The views expressed in this paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy, nor those of the National Bureau of Economic Research. We are grateful to Carlo Cottarelli, Alexander Klemm, Daniel Leigh, Jim Poterba, Mick Thackray, Leon Bettendorf and participants in the NBER Conference "Fiscal Policy after the Financial Crisis" for useful comments and suggestions and Oana Luca for helpful research assistance.
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"Fiscal Devaluation" and Fiscal Consolidation: The VAT in Troubled Times

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