The Digital Gamble: New Technology Transforms Fiscal Policy

26  April 2018    11:00 am

Geneviève Verdier, International Monetary Fund (IMF)

In cooperation with:

Joint Vienna Institute (JVI) (FIW) 

Venue

wiiw, Rahlgasse 3, 1060 Vienna, lecture hall (entrance from the ground floor)

Description

Digitalization presents both opportunities and risks for fiscal policy. It has the potential to improve the design and implementation of fiscal policy, but it also creates new challenges. The analytical chapter of the IMF’s April 2018 Fiscal Monitor first analyzes improvements in policy implementation with illustrative examples on tax compliance and spending efficiency. The analysis suggests that adopting digital tools could increase indirect tax collection at the border by up to 2 percent of GDP per year. In the future, digitalization could also help governments track down taxes on wealth sheltered in offshore financial centers, estimated at 10 percent of world GDP. On the spending side, country case studies show how digitalization can play a role in improving social protection and the delivery of public services. The chapter also discusses the design of future policy, focusing on the implications of the rapid expansion of digital firms whose business model—for example, sales with little physical presence and reliance on online customers to generate commercially valuable information—raises new questions about the allocation of international taxing rights. Finally, while digitalization offers many potential benefits, the chapter also discusses how it can create opportunities for fraud and increase government vulnerabilities—important challenges governments must address to reap its dividends.

Geneviève Verdier is a Deputy Division Chief in the IMF’s Fiscal Affairs Department. Prior to joining the IMF, she was an assistant professor of economics at Texas A&M University. She previously worked as an economist in the Research Department of the Bank of Canada. She earned a Ph.D. from the University of British Columbia. Her work to date and publications in IMF research and policy publications, books, and peer-reviewed journals cover a wide range of macroeconomic issues related to public spending efficiency, public investment, sovereign debt restructuring, economic growth and financial development.
 

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