Fiscal Stability Research Articles

Digital Transformation of Tax Administration

The article substantiates the need and importance of digital transformation of tax administration in response to the challenges of deepening digitalization processes in all sectors of the economy and responding to epidemiological threats. The current trends of digital transformation of tax administration according to the subjective approach with the definition of additional economic and social effects for the development of public administration, business environment and welfare of society are identified and characterized. Based on these transformational trends, the qualitative level of digital maturity of tax administration in the world is generalized, which allowed concluding the active form of the global digital space of tax administration, which integrates digital infrastructure and digitalization of taxation processes, information interaction, information resources and tax data and norms of tax regulation, mechanisms of organization and management, as well as to form the tasks of digital transformation at the level of taxation processes. Given that the digital transformation of tax administration does not fundamentally change its essence and elements but concerns procedural issues, the potential of digital technologies is demonstrated in the example of foreign and Ukrainian practices of implementing Blockchain and smart contracts based on Blockchain, Big Data, Artificial Intelligence Technologies, Machine Learning, cloud technologies, the Internet of Things (IoT) as technological tools for the organization of tax relations and tax administration. Attention is paid to problematic aspects of fair taxation of digital business, its products and services (digital assets, digital services, and artificial intelligence and cloud services). The processes of digital transformation of tax administration in Ukraine are described. It is substantiated that to determine the level of effectiveness and the degree of progress of the digital transformation of tax administration, it is necessary to develop a methodology for assessing digital maturity and a system of indicators for specific contours of measurement. This is accepted as the goal of further research to ensure flexible fiscal policy and rapid response to the effects of crises, including the latest epidemiological challenges, improving tax surveillance and compliance control to ensure fiscal stability and tax security, better, transparent and fairer digital tax environment.

The Fiscal Hedging and Green Financing: Sustainability Challenges for Developing World

The global community has set intensive targets in Sustainable Development Goals (SDGs) to better people’s lives after closing the Millennium Development Goals (MDGs). It corresponds to the 2030 aspirations of the United Nations to enhance and promote the sustainable development of human society. The current paper explores the impact of fiscal hedging and R&D in energy Using a green-energy system in SDGs. To do this, we used TOPSIS and QARDL methodologies on a 21-year dataset of South and Southeast Asian economies from 2000 to 2020. The study results show that fiscal hedging contributes favourably to the environmental degradation of the underlying economy. Research and development (R&D) in renewables has contributed negatively to ecological degradation and SDGs in the economies of South & Southeast Asia. This study suggests policy guidelines for advanced and developing economies based on fiscal stability and technical innovation through R&D to meet SDG.

Hydrocarbon Prices Shocks, Fiscal Stability and Consolidation: Evidence from Russian Federation

Hydrocarbon Prices Shocks, Fiscal Stability and Consolidation: Evidence from Russian Federation

Impact assessment of fiscal decentralisation on macroeconomic stability factors (the Armenian case)

The paper aims at revealing the existing connection between fiscal decentralization and macroeconomic stability indicators. Within the framework of the research, we evaluated the impact of the fiscal decentralization indicators of the Republic of Armenia on the indicators characterizing macroeconomic stability. The analysis was performed by econometric modeling, linear regression models were compiled using the statistical software "EViews". The indicators characterizing macroeconomic stability were considered as dependent variables, and the indicators characterizing fiscal decentralization as independent variables. As a result, it became clear that most of the indicators characterizing fiscal decentralization have a significant impact on some macroeconomic indicators. This indicates the need for further deepening of decentralization processes for balanced regional development.

A Study on Reassessing Tax and Development Research in Present Context

The shortcomings of economic statistics for developing nations, as well as the possibility that bad data have led to inaccurate research findings and bad policy recommendations, are of growing concern. Cross-country tax data provide a striking example, with existing datasets frequently being significantly underreported, analytically imprecise, rife with errors, and glaringly opaque. The International Centre for Tax and Development's new Government Revenue Dataset, which offers a more dependable, transparent, and thorough basis for international research, is introduced in this paper. Initially, this new dataset was used to reevaluate key issues regarding the connections between tax and aid, elections, economic growth, and democratization. Governments receive the money they need from taxes to invest in development, alleviate poverty, and provide public services. It offers a remedy for aid dependency in developing nations and offers the fiscal stability and sustainability required to foster growth. In terms of transparency and fairness, tax system design is also closely related to domestic and international investment choices. Enhancing domestic resource mobilization involves more than just increasing revenue; it also entails creating a tax structure that supports social justice, good governance, inclusiveness, and appropriate income and wealth disparities. The social contract between governments and citizens and the improvement of the state's ability to function effectively both depend on taxes. The taxation system is essential to creating more accountable and effective states because it promotes communication between states and their citizens. Tax administration reforms may spread to other areas of the public sector.

Տնտեսական շոկերն ու հարկաբյուջետային շրջանակը։ Արդյո՞ք կդիմանանք ցնցումներին/Economic Shocks and Fiscal Framework. Will we Survive this Shock?

The Russian-Ukrainian conflict has caused significant upheavals and uncertainties not only in the region, but also around the world, which has led to a revision of positive forecasts. Although these estimates contain huge uncertainties and will be adjusted many times by the end of the year, the quantitative estimates presented at this time provide some insights into the expected economic developments and make it possible to estimate by calculation the extent to which these negative phenomena will affect the budget system of Armenia, and what problems the fiscal policy may face? Taking into account the fact that these shocks also posed significant threats to fiscal stability, the compliance of the obtained results with the current fiscal rules was assessed.

НОВІТНІ ТЕНДЕНЦІЇ РОЗВИТКУ СИСТЕМИ НЕПРЯМОГО ОПОДАТКУВАННЯ В УКРАЇНІ

The article examines the latest trends in the development of the indirect taxation system in Ukraine. This is due to the fact that in the last few years there have been certain structural shifts in the system of indirect taxation and changes in tax legislation as a reaction to external negative shocks (the COVID-19 pandemic and full-scale military aggression against Ukraine). In view of this, the purpose of this work is to assess the latesttrends in the development of the indirect taxation system in Ukraine, taking into account the impact on the state budget revenues and the state finance system as a whole of such factors as the COVID-19 pandemic and the full-scale military aggression of the Russian Federation in Ukraine, which allows to determine the strong and weaknesses of the domestic indirect taxation system.The conducted study testifies to the significant impact of external negative shocks on the structure of tax revenues from the payment of indirect taxes. Revenue volumes have decreased significantly, despite the fact that it is indirect taxes that act as fiscal stabilizers for the public finance system. In particular, there was a trend of increasing structural disparities both in theindirect taxation system and the tax system in general.It is shown that some tax innovations related to the full-scale military aggression against Ukraine are appropriate and allowed to stabilize the situation in the economy and society. Meanwhile the results of the analysis of most of the tax reforms during martial law indicate their excessive liberalization. Some of the considered changes did not bring the desired regulatory effect, but instead created threats to the fiscal security of the state and prerequisites for abuse by non-compliant taxpayers.It was concluded that it is necessary to further increase the efficiency of the functioning of the indirect taxation system of Ukraine by improving the electronic VAT administration system and implementing the Track&Trace system for the excise tax payment control system.

INTERDEPENDENCE OF FISCAL CONSOLIDATION AND ECONOMIC GROWTH IN EU COUNTRIES WITH DIFFERENT LEVELS OF DEVELOPMENT

The concept of fiscal consolidation is most often mentioned during major economic crises, which are usually the result of economic shocks caused by crises such as the one in 2008, but also the last crisis caused by the COVID-19 pandemic. In such circumstances, as a rule, high deficit and/or enormous growth of public debt occur. Therefore, many countries need to consolidate fiscally their public finances. In this paper, the focus of the analysis is on the impact of fiscal consolidation on the economic growth of the European Union with different levels of development. It is assumed that countries with low incomes and less developed economies have a special obligation and a need for stable public finances. The same refers to the small and open economies that are largely exposed to the stability/instability of the surrounding countries. Therefore, it is very important that countries with a low level of development pay special attention to the fiscal stability of the country’s public finances.

Comparison of changes in the labour markets of post-communist countries with other EU member states

strengthen their international competitiveness. This was linked to the implementation of institutional and economic reforms, significant technological changes and improvements in the quality of human capital, as well as fiscal stabilisation policies. These changes affected their situation in the labour market.
 Purpose of the article: The aim of the study is to assess changes in the situation in the labour market in the EU with particular emphasis on the post-communist countries in the period 2002? 2019.
 Methods: The situation of countries in the European labour market was estimated using the TOPSIS method. A similarity matrix of changes in the composite variable for each country was then constructed using the Dynamic Time Warping method. On its basis, homogeneous clusters of countries were determined using the Ward?s method.
 Findings & value added: Four homogenous clusters of countries were formed. The post-communist ones belonged to two groups. In one, there were two countries ? Croatia and Slovakia. The rest of the post-communist countries were in a large cluster, which also included Germany, Malta, Finland, Portugal, France and Belgium. Changes of the situation in the post-communist countries in this group improved very much during the analysed period (this was particularly evident for Czechia, Estonia and Poland). It is interesting to investigate whether the reaction of labour markets to changes in the global economic situation in post-communist countries is similar to that in the old EU countries. The similarity of changes can be measured using the DTW method. There is an empirical research gap in this respect. Therefore, the added value is the use of this method in assessing similarities of changes in the labour market situation in post-communist countries in comparison to the Western European ones.

The role of automatic stabilizers in business cycle: the case of indonesia

TThe use of large fiscal stimulus packages to dampen the impact of Covid-19 recently has raised concerns about the effectiveness of the discretionary fiscal policy. This paper aims at analysing the feasibility of automatic fiscal stabilisers to mitigate economic fluctuations in the case of Indonesia. Using the IMF standard model for quarterly data over the period of 2001(1) to 2019(4), we find that the role of automatic fiscal stabilisers is getting greater both in revenue and spending. This implies that the automatic fiscal stabilisers are feasible as the main fiscal policy instrument for economic stability goals in the future. However, given the existing circumstances, Indonesia has to reform economic, regulatory, and institutional ecosystems in adopting the automatic fiscal stabilisers.

Does Air Pollution Impact Fiscal Sustainability? Evidence from Chinese Cities

Fiscal sustainability is an issue of great concern for governments globally and air pollution control has become an important factor affecting fiscal sustainability. This study aims to examine the impact of air pollution on fiscal sustainability in the short and long run. We conducted an empirical analysis based on air pollution and local government debt data on China’s prefecture-level cities in 2014–2019, using regression discontinuity design (RDD) and a panel data model. The results show that air pollution reduces the debt burden of governments in the short run. However, in the long run, addressing the negative impacts of air pollution adds to the debt burden of local governments, hindering fiscal sustainability. Fiscal freedom and the level of public services significantly moderate the negative impact of air pollution on fiscal sustainability. A higher level of fiscal freedom generally indicates a greater incentive for local governments to raise pollutant emission standards, strengthen the construction of green infrastructure, and subsidize green enterprises. Furthermore, a higher level of public services reflects better infrastructure and higher levels of investment in environmental protection, which help to reduce the negative impact of air pollution. The governments are suggested to take measures to effectively control air pollution, so as to enhance fiscal stability in the long run.

Sustainable and equitable pensions with means testing in aging economies

A means-tested pension system has a distinct feature that tailors the level of pension benefits according to individual economic status. In the context of population aging with widening gaps in life expectancies, we show that this feature generates an automatic mechanism that (i) mitigates the pressing fiscal cost of an old-age public pension program (fiscal stabilization device) and (ii) redistributes pension benefits to those in need with shorter life expectancies (redistributive device). To evaluate this automatic mechanism, we employ an overlapping generations model with population aging. Our results indicate that this novel mechanism plays an important role in containing the adverse effects of population aging on the fiscal costs and enhancing the progressivity of a pension system. More pronounced aging scenarios further strengthen the role of this mechanism. A well-designed means test rule can create a sufficiently strong automatic mechanism to keep public pensions sustainable and progressive under population aging.

Decade of Patient Experience Improvement at a Tertiary Care Urban Hospital.

The purpose of this quality management study was to demonstrate how one hospital made a journey from average patient experience to become a regional leader in the experience of patient care for nationally recognized quality and safety metrics. Saint Francis Hospital & Medical Center (SFHMC) located in Hartford, Connecticut, serves a diverse sociodemographic community as part of Trinity Health. "Recommend the Hospital" (RTH) has been the main marker of patient experience at SFHMC and Trinity Health across the United States as part of the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS). From 2010 to 2019, SFHMC implemented unit-based rounding hospital-wide, adopting charge nurse and executive leadership rounding as standard work. The intense support from senior leadership spurred the implementation of these changes across middle management and all frontline workers. The t test was used to determine differences between the mean RTH scores between SFHMC, Connecticut, and the United States. Patient experience at SFHMC was regularly assessed by Press Ganey surveys and HCAHPS, which demonstrated higher scores than averages for the state of Connecticut and the United States between 2010 and 2019 (both Ps < .001). SFHMC was the top performer with an RTH score of 83%, with the state average being 71% and the national average being 72%. In the years following the implementation of a multipronged low-cost strategy, hospital RTH scores rose linearly from the state and national average. SFHMC observed gains in patient safety and quality scores as measured by national benchmarks, including Leapfrog patient safety scores of 7 A's and 1 B over a 4-year period. SFHMC was the only hospital in Connecticut to receive an A grade 4 years in a row. A combination of nurse-led, unit-based rounding and executive team rounding with a consistent focus on patient experience resulted in significant improvement in RTH scores for a busy teaching urban hospital, with only a modest investment of resources. There was also improvement in quality and safety outcomes, which together with patient experience of care drove fiscal stability in an increasingly value-based health care environment.

Formation of Long-Term Fiscal Sustainability of Kazakhstan Using the Rule Structural Budget Balance

The purpose of the study is to substantiate the potential of using the results of modeling potential GDP and estimating the output gap to comply with fiscal rules that are adequate for the corresponding economic cycle of the economy of Kazakhstan. The methods of economic, statistical, graphical, system, functional analysis, economic and mathematical modeling are applied. To achieve this goal, the analysis of Kazakhstan’s fiscal stability was carried out based on the assessment of Kazakhstan’s potential GDP and the calculation of output gaps, which were carried out based on the dynamic series method of the reported real GDP in 2005 prices for 1991-2019 using the Hodrick-Prescott filter (CP) using the EViews 10 econometric package. The current mechanism for using the output gap indicator in Kazakhstan’s fiscal policy does not have sufficient flexibility. For a timely response of the budget system to changes in the economic situation in the country or abroad, considering the output gap, it is important to introduce an automatic adjustment system that can eliminate contradictions and inconsistencies when making macroeconomic policy decisions by the main regulator and the government of the country. To do this, there is a need to revise the existing fiscal policy based on building a system of new budget rules on countercyclical principles. The proposed alternative fiscal model with the introduction of the rule on the structural balance of the budget is aimed at ensuring long-term fiscal stability, which does not allow for a pro-cyclical policy.

MODELING THE NONLINEAR FISCAL REACTION FUNCTION IN MALAYSIA

The fiscal reaction function (FRF) provides valuable insights into a country’s fiscal sustainability and output stability. However, there is no consensus yet on how to model it. Thus, this study investigates the best functional form for the FRF by adopting a nonlinear autoregressive distributed lag approach that accounts for a potential structural break in the data across periods. We examine the case of Malaysia and address the country’s data by using a break-point of the unit root test. The test results indicate the presence of a structural break in the country’s FRF. Moreover, the primary balance of Malaysia has an asymmetrical reaction to the country’s public debt and the output gap. This result suggests that a nonlinear behavior of FRF with a structural break is an accurate approach for the fiscal authority in Malaysia (for example, the Ministry of Finance) in designing prudent fiscal policy. This study finds that an asymmetric fiscal reaction in Malaysia neither guarantees fiscal sustainability nor supports output stability, thus suggesting the need for an independent fiscal council to promote prudent fiscal policy.

Analysis of the effectiveness of regulation on financial health of Spanish local governments

ABSTRACT The need to reduce public sector costs and debt has resulted in the implementation of requirements in many countries. Spain belongs to a group of countries which monitor the financial health of their local governments, using financial indicators enforced by law, and reporting this information periodically. The objective of this paper is to analyse whether the introduction of the 2012 Spanish legislation regarding fiscal stability and budgetary balance and Ministry of Finance Order 1781/2013, which develop new indicators, have led to improvements in the financial health of local governments. The results of our analysis show that the introduction of legal requirements is effective and that the disclosure of indicators for benchmarking purposes has been beneficial and positive, although this is not so in all cases. The practical implication of this study is that the dual demands of evaluating the financial situations of local governments and disclosing this information reinforce their responsibility with respect to the general interest. This enables the comparative evolution of indicators, concluding that requirements are also needed to ensure that the goals are achieved, thereby helping to restore the reliability and transparency of their activities.

Study of fiscal decentralization, macroeconomic stability and regional growth in Indonesia

Indonesia has been implementing fiscal decentralization since 2001. In theory, fiscal decentralization affected macroeconomic stability and economic growth—this study using data panels at the provincial level from 2010 to 2013. In the relationship between fiscal decentralization and macroeconomic stability with control variable income, significant variables are income to GRDP, GRDP per capita, and population. If control variable expenditure, significant variables are expenditure to GRDP, GRDP per capita, and population. In the model that analyzes fiscal decentralization and economic growth with control variable income, significant variables are income to GRDP, consumption to GRDP, and population. Meanwhile, if control variable expenditure, significant variables are expenditure to GRDP, consumption to GRDP, and population. By using sensitivity analysis, the population variable is a high priority. Therefore stakeholders should treat population variables carefully.

Fiscal dominance and exchange rate stability in Nigeria

This study investigates fiscal dominance and exchange rate stability in Nigeria. The period of investigation spanned 1981q1–2018q4, and the Structural Vector Autoregression (SVAR) technique was employed to test the fiscal dominance hypothesis and further examine the shock transmission effects of fiscal deficit components such as budget deficit and public debt on exchange rate movement in Nigeria. As a robustness, Autoregressive Distributed Lag (ARDL) technique was employed to analyse the shock transmission effects of these components on the movement of exchange rate in Nigeria. More so, granger causality test was conducted to trace the direction of causality among the fiscal deficit components and the exchange rates. The results show that budget deficit and changes in exchange rates in Nigeria have bi-causal relationship, while public debt could not granger cause exchange rate movement in the country. The SVAR estimates suggests that exchange rate movement in Nigeria reacted only to the shock effects of financial openness and the ARDL results indicate that both public debt and budget deficit have destabilizing effects on exchange rates in Nigeria.

Disrupting the Welfare State? Digitalisation and the Retrenchment of Public Sector Capacity

ABSTRACT Welfare state bureaucracies the world over have adopted far-reaching digitalisation reforms in recent years. From the deployment of AI in service management, to the ‘opening up’ of administrative datasets, digitalisation initiatives have uprooted established modes of public sector organisation and administration. And, as this paper suggests, they have also fundamentally transformed the political economy of the welfare state. Through a case study of Danish reforms between 2002 and 2019, the analysis finds that public sector digitalisation has entailed the transfer of responsibility for key infrastructure to private actors. Reforms in Denmark have not only been pursued in the name of public sector improvement and efficiency. A principal objective of public sector digitalisation has rather been the growth of Denmark’s nascent digital technology industries as part of the state’s wider export-led growth strategy, adopted in response to functional pressures on the welfare state model. The attempt to deliver fiscal stability in this way has, paradoxically, produced retrenchment of critical assets and capabilities. The paper’s findings hold important implications for states embarking on public sector digitalisation reforms, as well as possibilities for future research on how states can harness technological progress in the interests of citizens – without hollowing out in the process.

How to Ensure Fiscal Sustainability in Russia.

—The COVID-19 pandemic and global economic crisis aggravated risks to long-term fiscal stability in Russia. The article analyzes why compliance with the fiscal rule prevents us from curbing these risks, and the way in which construction of this rule should be modified to improve its efficiency. It makes a strong case for system-based fiscal consolidation to enhance fiscal stability and presents options for optimization of spending and tax increases.