Fiscal Transparency Research Articles

How to strengthen the Polish venture capital market? An analysis of the solutions in selected countries / Jak wzmocnić polski rynek venture capital? Analiza przyjętych rozwiązań w wybranych krajach

The history of venture capital funds has shown that they are crucial for the promotion of innovation and competitiveness of the economy. By funding projects that are considered by others as too risky, they contribute to the increase in the number of modern enterprises as well as create jobs and constitute a significant participant in the capital market. This article aims to identify the factors having an impact on the condition of the Polish market of venture capital investments. An analysis of the system solutions adopted by the US and European leaders in the venture capital market indicates that of greatest importance are the legal regulations on the organisational forms of funds and their fiscal transparency as well as those on the system of tax reliefs and exemptions and pension funds’ participation possibilities. Such aspects as the corporate income tax rate and the capital gains tax rate proved to be of secondary importance for the operation of venture capital funds.

Fiscal Transparency and the Performance of Government Financial Assets

Fiscal Transparency and the Performance of Government Financial Assets

Trends in Fiscal Transparency: Evidence from a New Database of the Coverage of Fiscal Reporting

Although there are several measures of fiscal transparency, none provides satisfactory information on certain issues of macroeconomic relevance, including whether fiscal data are available for all of general government, whether the government reports a balance sheet, and whether spending and revenue are reported on a cash or accrual basis. Drawing on government finance statistics reported to the IMF, this paper presents a new database of fiscal transparency for 186 countries in 2003–13 and derives from it indices of the overall comprehensiveness of fiscal statistics as well as specific indices of the coverage of public institutions, fiscal flows, and fiscal stocks, respectively. It finds evidence of gradual improvement, most notably in the coverage of institutions, but most countries’ reporting remains far from comprehensive.

Republic of Mozambique: Fourth Review Under the Policy Support Instrument and Request for Modification of Assessment Criteria—Press Release; Staff Report; and Statement by the Executive Director for the Republic of Mozambique

This paper discusses Republic of Mozambique’s Fourth Review Under the Policy Support Instrument (PSI) and Request for Modification of Assessment Criteria. Although program performance at end-2014 was mixed, the implementation of the structural reform agenda has improved, and the new government has expressed strong commitment to program implementation, including through strong policy adjustment, credible corrective measures, and new steps to improve fiscal transparency. Maintaining fiscal discipline over the medium term through a more prudent debt management strategy will be essential to preserve debt sustainability. The IMF staff recommends the completion of the fourth PSI review.

The global prospects of taxation

As the process of establishing international economic and financial relations between national economies is on the rise, many states encounter substantial difficulties in the process of collecting their tax claims. The most powerful countries in the world try to overcome this controversy by changing the international tax rules. The turning point was the financial-economic crisis of2008-2009, when the international community more vigorously embarked on resolving international tax issues. The OECD, the G20, the UN, the EU and a number of other powerful international organizations continued their activities on establishing a stronger framework of the international tax system. Global tax initiatives embodied in the soft law regulations have changed (to a varied extent) the structure of national tax systems as well as the direction of national policies, and ultimately undermined the financial foundations of the social welfare state. The world's 'taxation landscape' is indisputably dominated by two major processes embodied in the concepts of tax harmonization and tax competition. The global crisis in financing contemporary states has weakened their resistance towards more extensive international tax cooperation. As a result, they increasingly accept global tax standards and are more vigorously involved in the international exchange of tax information for the purpose of counteracting international tax fraud. Changes in national tax systems are necessarily accompanied by changing relations between tax administrations and multinational companies as large taxpayers. The traditional public law relations are gradually changed by introducing some elements of 'negotiations and mutual agreement', which are aimed at strengthening mutual trust and avoiding unnecessary disputes and costs. Although they are currently no more than theoretical assumptions and political considerations, there are proposals for introducing global taxes and establishing the world tax organization. Irrespective of the idealistic or utopian nature of these proposals, we simply cannot rule out the possibility that a future world disaster may serve as an valid excuse for accepting global taxes in order to remove the detrimental consequences of a force majeure. In that context, there is a growing number of countries that have been accepting the global tax standard on the automatic exchange of financial information, which has laid a solid legal and technical ground for introducing global taxation. The 'global taxation network' is gradually extending to all tax payers, featuring full fiscal transparency. Unless such global plans are undermined, all natural and legal persons will de lege ferenda become prisoners of the global fiscus. Unfortunately, such an apocalyptic future of taxation is quite probable considering the determination of the powerful international organizations and the world elite acting through these institutions to implement the global political agenda.

The Causes of Fiscal Transparency: Evidence in the Brazilian States

The transparency of governments to their citizens is seen as a necessary factor in democratic accountability and, consequently, in the consolidation of democracy. Although the importance of transparency in government is often highlighted, its causes are still unknown, especially in the Brazilian context. Following the trend of international empirical research, this exploratory study investigates the relationships between three sets of variables (current and past fiscal variables, socioeconomic variables and political variables) and fiscal transparency in the Brazilian subnational context. To identify the relationship between fiscal, socioeconomic and political variables and fiscal transparency, the multiple linear regression technique was used. Prior to conducting the regression using the method of ordinary least squares, factor analysis was used, aiming to group the fiscal and socioeconomic variables into factors not only to reduce their quantity but also to eliminate their multicollinearity problems. Political variables, due to their qualitative nature, remained in their original form. The factor analysis sorted the variables into two groups: fiscal and socioeconomic factors. Because multiple regression allows only for the evaluation of the relationship between the parties included in the sample and the reference party, an F test was used to assess differences in the level of transparency among political parties. The results indicated that fiscal and socioeconomic variables explain the transparency levels of the Brazilian States. However, the political variables were not significant, indicating that the disclosure of fiscal information in Brazil seems not to be influenced by political ideologies. Furthermore, it is evident that the lack of a regulatory model of transparency in the budget process leads States to disclose a great deal of information about budget execution. Finally, the findings indicate that as an instrument for democratic consolidation, fiscal transparency remains incipient in Brazil.

Overview of New Paths and Patterns in EU Tax Development with Focus on EU Soft Law and External Factors (Part 2)

A very different - more indirect and factual than formal legal - contribution to the EU tax law-making process is that of the influence of external multi-disciplinary factors. They relate in particular to economic, political and social embedding, comparative better international law, morality and historical imprint. As they are by nature external factors - and by the same token non-legal acts - their impact on the making and evolution of EU tax law is limited to inspiring the official competent EU authorities, eventually serving as 'bottom-up' element in the hard or soft tax law-making process when recognized and legitimized by the 'top-down stamp' of the official competent EU authorities. Paraphrasing our opening citation: 'Some true, some light, but every one of you / Stamp'd with the image of the European Union'. What thus happens in the end is that we are looking, in this era of fiscal transparency, at new trends and patterns in the ongoing process of EU tax development related to the joint impacts of respectively external factors to the EU legal process (Chapter II) and of the 'reshuffling' of internal legal sources on the part of the competent EU tax authorities (and also, in different degrees and levels, of parallel international organizations as OECD) (Chapter I). Finally, in Chapter III, the discussions of Chapters I and II are related to the strategic EU development of 'ever closer union among the people of Europe'.

Accounting Standardization and Financial Reporting in Public Sector in Albania- Future Challenges

The need for improving and strengthening all the links of financial reporting chain not only in private sector but also in public sector, directly contributes to overcome the 2010-2012 global crisis and helps to transform the ongoing period into a global economic growth period. The governments should implement the necessary institutional measures for public sector growth, financial management transparency and accountability.An integral and fondamental element of these agreements is the usage of accruals (according accounting) by approving and implementing International Public Sector Accounting Standards (IPSAS), which enable the full disclosure of all the assets, liabilities and conditional liabilities, as a basic issue for real assessment and financial management of public sector, extended monitoring of government debt and liabilities, for their real economic implications. The implementation of accounting standards in public sector of Albania, besides the unification of accounting and financial statements preparation, intends to influence right, qualitative and long term decision-making, at all government levels; to increase the effectiveness and efficiency of financial resources; formalize the economy and better fight the phenomena of corruption, fraud, money laundering or fundsabuse; improve the level of fiscal transparency to public and integrate or face the global economy.As the main challenge of this sector and also as a process that needs time, financial reporting, requires a continuous reformation of policies, institutions, structures and professionalsKey words: Accounting standartization, financial management/reporting, public sector.

Accounting Standardization and Financial Reporting in Public Sector in Albania- Future Challenges

The need for improving and strengthening all the links of financial reporting chain not only in private sector but also in public sector, directly contributes to overcome the 2010-2012 global crisis and helps to transform the ongoing period into a global economic growth period. The governments should implement the necessary institutional measures for public sector growth, financial management transparency and accountability.An integral and fondamental element of these agreements is the usage of accruals (according accounting) by approving and implementing International Public Sector Accounting Standards (IPSAS), which enable the full disclosure of all the assets, liabilities and conditional liabilities, as a basic issue for real assessment and financial management of public sector, extended monitoring of government debt and liabilities, for their real economic implications. The implementation of accounting standards in public sector of Albania, besides the unification of accounting and financial statements preparation, intends to influence right, qualitative and long term decision-making, at all government levels; to increase the effectiveness and efficiency of financial resources; formalize the economy and better fight the phenomena of corruption, fraud, money laundering or fundsabuse; improve the level of fiscal transparency to public and integrate or face the global economy.As the main challenge of this sector and also as a process that needs time, financial reporting, requires a continuous reformation of policies, institutions, structures and professionalsKey words: Accounting standartization, financial management/reporting, public sector.

A Study of China’s Local Government Debt with Regional and Provincial Characteristics

China’s Local Government Debt (LGD) grew rapidly after 2009. By using the National Audit Reports and self-collected data from provincial governments, we provide a decomposition of China’s LGD to the regional and provincial levels. We document regional characteristics regarding various aspects of LGD. When exploring provincial characteristics of LGD, we relate the causes of LGD to the mismatch of revenues and responsibilities in local government. By analyzing the structure of Local Government Fiscal Resources (LGFRs), we point out that LGD poses an essential challenge to China’s economic health due to the lack of fiscal transparency. We concisely analyze the expansion of Local Government Funding Platforms (LGFPs) and the issuance of Urban Development Investment Bonds (UDIBs). Finally, we propose several directions for a better management of LGD in both the short and long run, emphasizing adjustments of LGD term structures, improvement of financing channels, and reforms of fiscal systems to bring in more transparency and accountability. We suggest that the policies designed to resolve the LGD problem need to take into consideration the varying characteristics of LGD of different regions and provinces.

Explaining County Government Fiscal Transparency in an Age of e-Government

This research seeks to explain the fiscal transparency practices of individual U.S. counties by examining the extent of information shared with constituents via county government Web sites. This study evaluates a random sample of 400 U.S. counties, where 19 percent of those represented have populations of 100,000 or more residents, matching the same ratio of counties with populations of 100,000 or more residents nationally. We create a four-level categorical dependent variable measuring fiscal transparency and use a generalized ordered logit analysis with eight independent variables to explain the extent of fiscal transparency among the sample.

New IMF Code of Fiscal Transparency: Citizens should be involved in fiscal decision-making

Following extensive and protracted public consultations, the International Monetary Fund in August presented its new Fiscal Transparency Code – a standard which, once approved by the Executive Board, should be adhered to by all the member countries. One of the main novelties of the Code is the formal involvement of citizens in budget decision-making.

El intercambio automático de información: hacia el nuevo estándar de transparencia fiscal internacional

Las autoridades tributarias dependen cada vez más de la cooperación con sus contrapartes extranjeras para administrar más eficazmente sus leyes tributarias nacionales. Luego de los escándalos bancarios de 2008y la crisis financiera global posterior, el Foro Global sobre Transparencia e Intercambio de Información Tributaria ha impulsado el intercambio de información a requerimiento como el estándar internacional en materia de transparencia fiscal. Sin embargo, algunas medidas adoptadas por la UniónEuropea, iniciativas previas de la Organización para la Cooperación y Desarrollo Económicos (OCDE) y, sobre todo, la introducción en 2010 del«Foreign Account Tax Compliance Act» (Fatca) de los Estados Unidos han promovido la necesidad de adoptar el intercambio automático de informacióncomo nuevo estándar de transparencia fiscal internacional. El intercambio automático de información le permite a las jurisdicciones de la residencia verificar si sus contribuyentes han incluido correctamente las rentas obtenidas en el exterior, permitiéndole a las autoridades tributarias contar con alertas tempranas de posibles casos de incumplimiento. En febrero de 2014, la OCDE publicó su propuesta para un nuevo modelo global de intercambio automático de información aplicable a las cuentas mantenidas en entidades financieras. El nuevo modelo global contiene los instrumentos legales necesarios y los procedimientos de debida diligencia y reporte principalmente para las instituciones financieras.

Update on the Fiscal Transparency Initiative

This paper provides an update on staff’s work on a new Fiscal Transparency Code (FTC) and experiences with the initial pilot Fiscal Transparency Evaluations (FTE), the ground work for which was laid in a 2012 paper “Fiscal Transparency, Accountability, and Risk.” Both are part of ongoing efforts by the Fiscal Affairs Department, in cooperation with other departments, to strengthen the Fund’s fiscal surveillance and capacity building. The new FTC and FTE reflect the lessons of the recent crisis, incorporate developments in international standards, and build on feedback from consultations with stakeholders.

Book Reviews

Robin Hodess of the Transparency International Secretariat reviews “Open Budgets: The Political Economy of Transparency, Participation, and Accountability”, by Sanjeev Khagram, Archon Fung, and Paolo de Renzio. The Econlit abstract of this book begins: “Eight papers explore the causes and consequences of fiscal transparency, participation, and accountability. Papers discuss the origins, sources of sustenance, and survival prospects of budget transparency in South Africa; accountability from the top down?—Brazil's advances in budget accountability despite a lack of popular mobilization; a mutually reinforcing loop—budget transparency and participation in South Korea; budget transparency and accountability in Mexico—high hopes, low performance; Guatemala—limited advances within advancing limits; the limits of top–down reform—budget transparency in Tanzania; the diversification of state power—Vietnam's alternative path toward budget transparency, accountability, and participation; and capturing movement at the margins—Senegal's efforts at budget transparency reform. Khagram is John Parke Young Professor of Global Political Economy, Diplomacy, and World Affairs at Occidental College and Young Global Leader at the World Economic Forum. Fung is Ford Foundation Professor of Democracy and Citizenship with the John F. Kennedy School of Government at Harvard University. De Renzio is Senior Research Fellow with the International Budget Partnership, Research Associate at the Overseas Development Institute, and Research Associate at Oxford University.”

Budgetary Transparency and Democracy: The Effectiveness of Control Institutions

The objective of this paper is to identify the effectiveness of the Supreme Audit Institutions (SAIs) and of the legislatures in relation to the fiscal transparency of countries. To test the theory empirically, an analysis was also conducted of how transparency improves accountability and how transparency and accountability jointly relate to the degree of democracy of a country and to the perception of corruption. To conduct the proposed test, multiple linear regression models were used with the ordinary minimum squares method. The data were obtained from official reports on transparency, democracy and corruption, such as Open Budget Partnership, Transparency International, The Economist Intelligence Unit’s Index and Index Mundi. The results have shown that countries in which the legislatures and the SAIs have greater constitutionally determined interdependence have greater budgetary transparency. It was also found that countries that are more transparent have more and better accountability mechanisms and, consequently, a greater level of democracy and less corruption, all of which points to the importance of transparency in the process of democratic consolidation.

Local Government Debt and Municipal Bonds in China: Problems and a Framework of Rules

Local governments in China are facing heavy debt burdens, a low level of fiscal transparency and a lack of constraints by local democracy. Since 2008, local government debts have skyrocketed. This article analyses the current state and features of local government debts and the two kinds of 'quasi municipal bonds' in China—urban investment bonds and local government bonds—along with their problems and risks. It examines the risks connected with local government debts and these bonds from the perspectives of public finance and political economy. It concludes with a discussion of a framework of rules for local government debt financing, especially for the issuance of municipal bonds in China.

Russian Federation: Fiscal Transparency Evaluation

Russian Federation: Fiscal Transparency Evaluation

Coordinating the Action of Regional and Global Players during the Shift from Bilateralism to Multilateralism in International Tax Law

The editor introduces this issue of the World Tax Journal with a contribution that welcomes the BEPS project as a significant step in the transition from bilateralism to multilateralism in international taxation. The broad-based consensus and participation in setting the BEPS standards make such project an enhanced form of multilateralism if compared with that which allowed the Global Forum on Fiscal Transparency to implement the standards developed by a more limited number of countries. The contribution of the editor also addresses how global multilateralism relates with regional multilateralism in some areas of the world, such as the European Union, calling for a stronger cooperation among the institutional players within a coordinated framework for the exercise of taxing powers in cross-border situations that could give rise to global international tax law.

Introduction to the special issue on fiscal transparency

Introduction to the special issue on fiscal transparency