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Although the Netherlands entered the so-called Great Lockdown with a strong fiscal position, the Dutch fiscal balance is projected to deteriorate by an unprecedented magnitude, largely as a result of necessary fiscal measures deployed to weather the economic impact of the COVID-19 pandemic. This paper performs a stochastic analysis of risks to Dutch fiscal and debt sustainability over the next decade, taking into account alternative recovery scenarios and associated fiscal consolidation paths and also a range of macroeconomic shocks drawn from the historical experience of the Netherlands. The simulations show that even under significant downturn scenarios and assuming an initially less favorable fiscal position due to persistent economic effects of the pandemic, risks to the Dutch fiscal and debt sustainability would remain contained.

Business and Economics --- Macroeconomics --- Public Finance --- National Deficit Surplus --- Debt --- Debt Management --- Sovereign Debt --- Forecasts of Budgets, Deficits, and Debt --- Simulation Methods --- Fiscal Policy --- Public Administration --- Public Sector Accounting and Audits --- Public finance & taxation --- Public debt --- Fiscal policy --- Government debt management --- Fiscal stance --- Fiscal risks --- Public financial management (PFM) --- Debts, Public --- Netherlands, The

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This paper uses a multi-region, forward-looking, DSGE model to estimate the macroeconomic impact of a tax reform that replaces a corporate income tax (CIT) with a destination-based cash-flow tax (DBCFT). Two key channels are at play. The first channel is the shift from an income tax to a cash-flow tax. This channel induces the corporate sector to invest more, boosting long-run potential output, GDP and consumption, but crowding out consumption in the short run as households save to build up the capital stock. The second channel is the shift from a taxable base that comprises domestic and foreign revenues, to one where only domestic revenues enter. This leads to an appreciation of the currency to offset the competitiveness boost afforded by the tax and maintain domestic investment-saving equilibrium. The paper demonstrates that spillover effects from the tax reform are positive in the long run as other countries’ exports benefit from additional investment in the country undertaking the reform and other countries’ domestic demand benefits from improved terms of trade. The paper also shows that there are substantial benefits when all countries undertake the reform. Finally, the paper demonstrates that in the presence of financial frictions, corporate debt declines under the tax reform as firms are no longer able to deduct interest expenses from their profits. In this case, the tax shifting results in an increase in the corporate risk premia, a near-term decline in output, and a smaller long-run increase in GDP.

Corporations --- Taxation. --- Corporate income tax --- Corporate taxes --- Corporation income tax --- Corporation tax --- Federal corporation tax --- Franchises, Taxation of --- Taxation of franchises --- Finance --- Valuation --- Taxation --- Corporate Taxation --- Economic Theory --- General Aggregative Models: Keynes --- Keynesian --- Post-Keynesian --- General Aggregative Models: Forecasting and Simulation --- Monetary Policy --- Fiscal Policy --- Open Economy Macroeconomics --- Macroeconomic Aspects of International Trade and Finance: Forecasting and Simulation --- Business Taxes and Subsidies --- Financial Economics --- Corporate & business tax --- Economic theory & philosophy --- Public finance & taxation --- Financial frictions --- Cash-flow tax --- Value-added tax --- Taxes --- Economic theory --- Economic forecasting --- Spendings tax --- United States

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The Global Integrated Monetary and Fiscal model (GIMF) is a multi-region, forward-looking, DSGE model developed by the Economic Modeling Division of the IMF for policy analysis and international economic research. This paper uses GIMF to illustrate when a destination-based cash-flow tax is equivalent to a combination of a consumption tax and a labor subsidy, as the latter combination have been advocated as proxies for the implementation of destination-based cash-flow taxes. The paper documents the conditions under which both types of taxes are identical and how the equivalence in terms of the real economy and tax revenue responses can be broken, namely after the introduction of finitely lived consumers that value government debt as net wealth (real economy) and the introduction of untaxed government expenditure (tax revenue).

Personal Finance -Taxation --- Public Finance --- Taxation --- General Aggregative Models: Keynes --- Keynesian --- Post-Keynesian --- General Aggregative Models: Forecasting and Simulation --- Monetary Policy --- Fiscal Policy --- Open Economy Macroeconomics --- Macroeconomic Aspects of International Trade and Finance: Forecasting and Simulation --- Business Taxes and Subsidies --- Debt --- Debt Management --- Sovereign Debt --- Taxation, Subsidies, and Revenue: General --- Personal Income and Other Nonbusiness Taxes and Subsidies --- Public finance & taxation --- Consumption taxes --- Value-added tax --- Public debt --- Revenue administration --- Personal income tax --- Taxes --- Spendings tax --- Debts, Public --- Revenue --- Income tax --- United States

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A New Smartphone for Every Fifth Person on Earth: Quantifying the New Tech Cycle.

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The Global Integrated Monetary and Fiscal model (GIMF) is a multi-region, forward-looking, DSGE model developed at the International Monetary Fund for policy analysis and international economic research. This paper documents the incorporation of demographic features into the model. The analysis presented illustrates how these new features enable the model to estimate some of the macroeconomic consequences of changing demographics.

Macroeconomics --- Demography --- General Aggregative Models: Keynes --- Keynesian --- Post-Keynesian --- General Aggregative Models: Forecasting and Simulation --- Monetary Policy --- Fiscal Policy --- Open Economy Macroeconomics --- Macroeconomic Aspects of International Trade and Finance: Forecasting and Simulation --- Demographic Trends, Macroeconomic Effects, and Forecasts --- Economics of the Elderly --- Economics of the Handicapped --- Non-labor Market Discrimination --- Demographic Economics: General --- Labor Economics: General --- Population & demography --- Population & migration geography --- Labour --- income economics --- Aging --- Population growth --- Population and demographics --- Labor --- Demographic change --- Population --- Population aging --- Labor economics --- Demographic transition --- United States