Role of International Organizations

1. Role of International Organizations Tax Reforms in Developing and Transition Economies Center for Taxation and Public Governance Prof. Dr. Geerten M.M. Michielse

2. International Organizations • International Monetary Fund (IMF) • World Bank • UN Expert Committee • Organization for Economic Cooperation and Development (OECD) • World Trade Organization (WTO) • World Customs Organization (WCO) • European Union (EU)

3. International Organizations(based on co-operation) • Inter-American Development Bank • Asian Development Bank • Bilateral Donors (e.g. USAID, DFID, Danida, SIDA) • Regional Co-operations between Tax Administrations (e.g. CIAT, IOTA, CREDAF)

4. International Monetary Fund • Policy maker • Driven by macro-economic stability • Technical Assistance • Tax policy • Legal drafting • Revenue administration • Tax administration • Customs administration

5. Tax Policy Assistance • Assessment of tax systems • Providing alternative tax policy solutions • Providing quantitative impacts of these solutions on macro-economic environment • Formulates best tax practices

6. Revenue Administration Assistance • Support the revenue mobilization component of IMF-supported programs • Improving the effectiveness of tax administrations • Increase of taxpayer compliance • Development (and monitoring the implementation) of reform strategies for tax and customs administrations • Establishment of “Large Taxpayer Units”

7. Legal Drafting Assistance Transformation of formulated tax policy and revenue administration policies into legal documents • Laws • Regulations • Explanatory memoranda

8. Tax Policy “Package” • Single-rate broad-based VAT • Broad-based income tax with minimum tax incentives • Streamlining of excise duties • Reduction (elimination) of import tariffs

9. Single-rate broad-based VAT • Important sectors (e.g. services) are still left out • Restrictive (or absence of) refund mechanism • Multiple rate structure

10. Broad-based income taxwith minimum tax incentives • Business income • Multiple (branch depended) rates • Incoherent depreciation schedules • Too many asset categories • Excessively low depreciation rates • Investment incentives • Tax holidays • Capital recovery incentives

11. Legal Drafting Principles • “Tailor-made” assistance • Simple and clear language • Consistency with local drafting style • Caveat: often seen as last prerogative of sovereignty (especially if related to IMF-funded program)

12. Influence of IMF • Conditionality (LOI): • Performance criteria (quantitative or structural) • Formal conditions of obtaining IMF finance; considered critical to achievement of program goals • Structural benchmarks • Points of reference against which progress may be monitored

13. Influence of OECD • OECD: • Harmful Tax Competition • Low effective tax rate • Exchange of Information • Anti Money Laundering / Terrorist Financing

14. Influence of EU/WTO(conditions for membership) • European Union: • Implementation of Directives • Compliance with: • “four freedoms” • Code of Conduct • World Trade Organization: • Protection against export subsidies • Introduction of transfer pricing rules

15. Influence of (Traditional) Technical Assistance • IMF • Legal drafting • World Bank • Implementation of administration policies (including training) • Bilateral or Regional donors • Implementation on a day-to-day basis (providing long-term experts) • “Twinning” of tax administrations • Practical possibility to draw on partner’s experience