Liam Ebrill

The Modern VAT

Value-added tax, or VAT, first introduced less than 50 years ago, is now a pivotal component of tax systems around the world. The rapid and seemingly irresistible rise of the VAT is probably the most important tax development of the latter twentieth century, and certainly the most breathtaking. Written by a team of experts from the International Monetary Fund, this book examines the remarkable spread and current reach of the innovative tax, and draws lessons about the design and implementation of the VAT, as experienced by different countries around the world. How efficient is it as a tax, is it fair, and is it suitable for all countries are among the questions raised in this highly informative and well-researched book that also looks at the likely future of the tax.

Bank Debit Taxes in Latin America: An Analysis of Recent Trends

Six Latin American countries have levied taxes on withdrawals from bank accounts, which have been viewed as a convenient tax handle during a difficult fiscal period. The paper reviews the arguments for and against this type of taxation, describes the taxes, and surveys their revenue performance and economic impact. It concludes that the recently implemented taxes have been successful in raising revenue in the short term, but that adverse allocational impacts have likely been significant. The tax may work better in times of fiscal crisis, when financial intermediation is deep, and when the tax rate is modest.

Production efficiency and optimal pricing in intermediate-good regulated industries

Abstract This paper reconsiders the relationship that exists between the production efficiency result of Diamond and Mirrlees and the Ramsey Rule. Specifically, the paper considers a general equilibrium hierarchical structure of production. One industry sells at least some of its output to another regulated industry. A single regulatory agency must balance the budgets of all regulated industries in the aggregate so as to maximize the utility of a representative individual. The Ramsey Rule always holds. Pricing rules, however, are far more complex. The optimum may have some negative price-cost margins and may not involve production efficiency.

Broad Money Growth and Inflation in the United States

A U.S. inflation-forecasting model recently developed by the Federal Reserve--the so-called P* relationship--is analyzed. An innovation in that model is the significance of M2 velocity in predicting changes in inflation. However, this papers empirical analysis indicates that an inflation equation in levels, rather than first differences, is more appropriate and reveals that the significance of M2 velocity is not robust to this alternative specification. Although there is a long-run relationship between M2 and the price level, the output gap in a Phillips curve model captures much of the short-run deviations from this relationship.