Taxing the people, not trade: the International Monetary Fund and the structure of taxation in developing countries

Reinsberg, B. , Stubbs, T. and Kentikelenis, A. (2020) Taxing the people, not trade: the International Monetary Fund and the structure of taxation in developing countries. Studies in Comparative International Development, 55(3), pp. 278-304. (doi: 10.1007/s12116-020-09307-4)

Abstract

Strengthening fiscal capacity in low- and middle-income countries is essential for achieving sustainable development. The International Monetary Fund—the world’s premier agent of fiscal policy reform—has taken a front-stage role in this process, promoting a model of tax policy that favors broad-based consumption taxes and discourages trade taxes. This article investigates the links between IMF-mandated tax reforms and the evolution of tax revenues. Using novel measures of tax-related conditionality and disaggregated data on revenues, our analysis shows that IMF interventions are significantly related to changes in tax structure. In particular, IMF programs increase revenues derived from goods and services taxes, but decrease revenues collected from trade taxes. Results for personal and corporate income taxes are inconclusive. These findings have important implications for debates on the role of the IMF in developing countries.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Reinsberg, Dr Bernhard
• Authors: Reinsberg, B., Stubbs, T., and Kentikelenis, A.
• College/School: College of Social Sciences > School of Social and Political Sciences > Politics
• Journal Name: Studies in Comparative International Development
• Publisher: Springer
• ISSN: 0039-3606
• ISSN (Online): 1936-6167
• Published Online: 08 July 2020
• Copyright Holders: Copyright © 2020 The Authors
• First Published: First published in Studies in Comparative International Development 55(3): 278-304
• Publisher Policy: Reproduced under a Creative Commons License