Public Financial Management (PFMx) Module 6 · Tax Revenue Analysis Public Financial Management ... Source: IMF WoRLD Tax Revenue Other Revenue. ... Nigeria Bangladesh Developing

This training material is the property of the International Monetary Fund (IMF) and is intended for use in IMF Fiscal Affairs Department (FAD) courses.Any reuse requires the permission of the IMF and FAD.

Module

Tax Revenue Analysis

Public Financial Management (PFMx)6

Taxation and the Budget Cycle

LegalFramework

FiscalFramework

#1

BudgetPreparation

#2ControlandAudit

#5

AccountingandReporting

#4Budget

Execution

#3

Revenueforecasting

Accountability

TaxPolicy

Revenuecollection

Topics Covered

“In this world, nothing can be said to be certain except death and taxes.”– Benjamin Franklin (1789)

Tax Revenue Supports Budget Expenditure

The Importance of Tax Revenue

OTHER

71 %

29%

01020304050607080

Taxandotherrevenue:average2014-2016

Source:IMFWoRLD

TaxRevenue OtherRevenue

Non-Tax Revenues

Ø Grants

Ø Natural Resources

Ø State-Owned Enterprises

Ø Central Banks

OTHER

TaxRevenue OtherRevenue

44%

29%

21%

6%Taxrevenue

Grants

OilRevenue

Other

90%

10%

Belgium

Taxrevenuein2016(%totalrevenue)

Chad

Illustrating Cross-Country Differences

Source:IMFWoRLD

Tax Revenue Over Time

60

65

70

75

80

85

90

2000 2002 2004 2006 2008 2010 2012 2014 2016

Developingeconomies EmergingmarketsAdvancedeconomies

Mediantaxrevenue:2000-2016(%totalrevenue)

Source:IMFWEO

Tax Revenue Comparison

0

50

100

150

200

250

300

350

400

450

2010 2011 2012 2013 2014 201535

37

39

41

43

45

47

49

51

53

55Greece Turkey

TaxRevenue:GreeceandTurkey2010-2015(InBillionslocalcurrency,Greeceplottedonsecondaryaxis)

Source:IMFWEO

Tax-to-GDP Comparison

15

17

19

21

23

25

27

2010 2011 2012 2013 2014 2015

Greece Turkey

TaxRevenue:GreeceandTurkey2010-2015(%GDP)

Source:IMFWEO

Tax Ratio Averages

15%18%

22%

0

5

10

15

20

25

Developingeconomies

Emergingmarkets Advancedeconomies

Averagetaxrevenuein2016(%GDP)

Source:IMFWEO

Disparity in Tax Revenue (advanced economies)

0.6% 2%

Average22%

40%

47%

05

101520253035404550

Bahrain SaudiArabia AdvancedEconomies

Denmark Sweden

Taxratio(average2014-2016)

Source:IMFWEO

Disparity in Tax Revenue (developing economies)

6%9% Average15%

20% 20%

42%

05

1015202530354045

Nigeria Bangladesh DevelopingEconomies

Uzbekistan Senegal Lesotho

Source:IMFWEO

Taxratio(average2014-2016)

Key Elements Supporting Tax Revenue

Trend in Tax Ratio

0

5

10

15

20

25

19901992199419961998200020022004200620082010201220142016

Developingeconomies Emergingmarkets

Advancedeconomies

Averagetaxrevenuebyincomegroup:1990-2016

Source:IMFWEO

Characteristics of a Tax

Components of Tax Revenue

Tax Rate, Tax Base, and Tax RevenuesTaxRe

venu

e

TaxRate(%)

TheLafferCurve

Income, Consumption, and Savings

Personal Income Tax

Corporate Income Tax

DividendsOwnership

Value Added Tax

Excise Tax

Tax Mix Comparison

10%

30%

44%

1% 15%

CorporateIncomeTax

PersonalIncomeTax

DomesticConsumptionTaxesTaxesonInternationalTradeOtherTaxes

16%

14%

51%

11%

8%

Advanced Economies Developing Economies

Averagetaxmix:2013-2015 (%taxrevenue)

Sources:IMFWoRLD

Criteria of a Good Tax

$1,000 $1,000 $1,000 $1,000 $1,000

0

2

4

6

8

10

12

14

16

18

100 300 500 700 900 1100 1300 1500

Effe

ctiv

e ta

x ra

te (%

)

Gross Income ($)

Progressive tax

Proportional flat tax

RichPoor

0

2

4

6

8

10

12

14

16

18

100 200 300 400 500 600 700 800 900 100011001200130014001500

Effe

ctiv

e ta

x ra

te (%

)

Gross Income ($)

Progressive tax

BoomCrisis

Supporting Sound Tax Policy Through Tax Transparency

Broad Base Tax Rate

TaxRevenues

Institutional Setting for Tax Policy

TaxPolicyUnit

MinistryofFinance/Treasury

OtherMinistries

TaxAdministration

PrivateSector

SettingtheTaxPolicyReformAgenda

Tax Policy Process

TaxPolicyUnit

Ministry of Finance, Tax Administration, and Tax Policy

TaxPolicy