Ruud de Mooij
1900 Pennsylvania Avenue, NW
Washington, DC 20431
Institutional Affiliation: IMF
Information about this author at RePEc
NBER Working Papers and Publications
|March 2012||'Fiscal Devaluation' and Fiscal Consolidation: The VAT in Troubled Times|
with Michael Keen: w17913
This 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 quite sizably 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.
|"Fiscal Devaluation" and Fiscal Consolidation: The VAT in Troubled Times|
with Michael Keen
in Fiscal Policy after the Financial Crisis, Alberto Alesina and Francesco Giavazzi, editors
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.