Presentation: Digital Government, IMF Fiscal Monitor ... · Fiscal Affairs Department Chapter 2 of the April 2018 Fiscal Monitor Peterson Institute for International Economics April

Fiscal Affairs Department

Chapter 2 of the April 2018 Fiscal MonitorPeterson Institute for International Economics

April 12, 2018

Digital Government

2

Digital government

3

The digital transformation is underway

The rapid growth of the digital transformation is outpacing the

provision of basic public services

Digital technologies are spreading across governments, with some

regional leaders

NA EUR MENA CIS LAC AP SSA

KOR SGPKAZ

RUSEST ESP

CHL URY

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TUV MHL

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KNA FSM

CYP SMR

SYR LBY

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International Digital Adoption by Governments(Digital adoption index for governments, latest available year)

Source:World Bank 2016.

Access to Public and Digital Services in Developing Countries(Percent of population)

0

20

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1990 95 2000 05 10Improved water access InternetImproved sanitation Mobile phoneElectricity Mobile broadband

1. What governments can do now

– Reducing tax evasion from cross-border fraud

– Lowering revenue losses from personal income and wealth sheltered in tax havens

– Reducing leakage and take-up problems in social protection

2. Challenges, obstacles and risks

– Fiscal policy and digital businesses—A new challenge

– Digitalizing public finances—Obstacles and risks

4

Outline

What governments can do now

6

Improving tax compliance: Customs

Trade misreporting is non-trivial, particularly in LICs

… and potential revenue gains from digitalization are substantial

Could digitalization help reduce fraud in cross-border transactions?

The link between evasion and digitalization is significant

Median revenue potential from VAT is between 1 to 2 percent of GDP

AEs EMEs LIDCs

Potential VAT Revenue Gains

AEs EMEs LIDCs

Difference between importer and exporter reported values in percent of GDP

7

Improving tax compliance: Tax havens

• Revenue gains on existing wealth are low.

• But increased taxpayer information could facilitateCollect taxes before income is

transferred to tax havens

• Design and success of automatic exchange of Information on taxpayers

Wealth sheltered in tax havens is large

Could digitalization help reduce evasion to tax havens?

AEs EMEs LIDCs

8

Improving social protection coverage

IndiaLPG

subsidies

IndiaLPG

subsidies

FranceSocial

benefits

FranceSocial

benefits

IndiaLPG subsidies

FranceSocial benefits

Digitalization can help … … but is only part of the solution

• Comprehensive reforms (India)

• Privacy and security controls are essential (India and South Africa)

• Digital exclusion can put program objectives at risk (India)

• Digital outreach tools are not sufficient (France)

9

Improving social protection coverage

Challenges, obstacles and risks

Tech giants are increasingly dominant

High profitability

Heavy reliance on intangible assets

Sales with little or no physical presence

User-generated value11

Taxation and the digital economy

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The Race to a TrillionGlobal Top 20 Firms By Stock Market Capitalization(Billions of US dollars, March 7, 2018)

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Taxation and the digital economy

• What is different? The scale of operations.

• But they should not be singled-out for taxation purposes

• Measures should be internationally coordinated and consistent with a long-term vision for international corporate taxation

13

Obstacles and risks

Digital exclusion

Resources

Institutional capacity

Fraud

Privacy and cybersecurity

• Digitalization is transforming how we live and the conduct of policy

• Governments cannot stay on the sidelines of this transformation

• Overcoming challenges will require:– A comprehensive reform agenda– Risk mitigation– Adequate resources– International cooperation

14

Policy implications

Thank you!