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This report takes an in-depth look, from a policy perspective, at the trade-offs between increasing tax collection and improving the equity of the fiscal system. As part of this effort, the report places the Peruvian tax system in an international context and considers the key challenges the government is facing in its drive to increase revenue. It also conducts qualitative and quantitative analyses of the impact of taxes and transfers on inequality and on the distribution of income. The report then makes several policy proposals that would increase tax collection without jeopardizing equity, and it then simulates the impacts of these changes on collection and equity. This advice spanned the 2012-2014 period, and included research on several tax policy-related issues, such as legal advice on double-taxation treaties and in-depth analyses of tax exemptions. To keep the focus tight, some of the work is not included in this report. Contributions were originally written in Spanish to provide the Ministry of Economy and Finance (MEF) with timely advice on the subject and were discussed with the counterparts during and immediately after its preparation. As a result of prioritizing this process, two teams focused on different areas of research and were able to contribute to the analytical base behind the ongoing tax reform. The report summarizes the main elements of this process and resulting advice. It comes out at the same time as the finance ministry announces the first set of tax reforms that were informed by this work.

Digital technology allows businesses to operate in a country without a physical presence, which poses challenges for traditional taxation. The digital debate focuses on direct taxation and the creation of new taxing rights arising from the tax claims of market jurisdictions on income obtained by foreign digital suppliers conducting business therein without any physical presence. Tax Theory Applied to the Digital Economy analyzes the tax-disruptive aspects of digital business models and reviews current tax initiatives in light of traditional tax theory principles. The analysis concludes that market countries' tax claims are unsubstantiated and contravene the most basic foundations of tax theory, giving rise to a series of legal, economic, tax policy, and tax administration issues that policy makers cannot overlook. The authors propose establishing a digital data tax (DDT) that is a license-type consumption tax, rather than an income tax, on the international supply of Internet bandwidth to access digital markets. The DDT can be applied either globally or unilaterally, and could become a significant source of tax revenues for market jurisdictions. It is aligned with tax principles and it does not conflict with other tax initiatives: the DDT taxes foreign digital companies as consumers, while income tax proposals tax them as suppliers. The authors also propose creating a new global Internet tax agency (GITA) under the auspices of the United Nations that would provide a neutral forum for political discussion and technical assistance in the area of digital taxation. The digital economy is a global phenomenon that requires a global solution: the creation of global taxing mechanisms and global institutions that provide technical assistance and support for successful global implementation. The book explains difficult technical concepts in plain language and contributes to the digital tax debate in a way that can be understood by anyone. Such understanding is essential to obtaining global support, achieving tax compliance, and fostering multilateral tax cooperation.

The objective of this working paper is to provide guidance on the dilemma that governments are facing because of the economic crisis triggered by COVID-19. Measures adopted by governments during the contention phase to alleviate cash flow pressures on taxpayers require budget expenditures that exacerbate revenue losses from reduced tax bases. In parallel, governments are struggling with public expenditure needs that call for creating fiscal space. During this crisis there has been a significant increase in digital transactions as well as an acceleration of digital economy business models and trends. As a result, new income sources have appeared, and governments must find ways of taxing them. The first part of this paper provides guidance on practical measures that may be applied by tax authorities to strengthen cash management and alleviate cash flow constraints on taxpayers. Most of these measures are applicable primarily during the contention phase of the COVID-19 health and economic crisis, but there are others well positioned to support the recovery phase. This paper elaborates on some of the recommendations profiled in the 'Revenue Measurements on Tax and Customs' document produced by the Fiscal Policy and Sustainable Growth unit,2 which serves as the umbrella document for this one. The main scope of this paper is to further develop specific practical measures for improving the cash management of businesses and households faced with liquidity constraints during this period. It also provides recommendations to revenue administrations for improving compliance and receipt monitoring during the contention phase. The second part of this paper focuses on post-crisis measures that may compensate for the fiscal deficit generated by cash flow management and temporary tax relief measures. This paper is a continuation, from a cash flow management perspective, of previous World Bank Group research conducted in the areas of fiscal policy and revenue administration implications in response to the COVID-19 pandemic.

Public spending plays a key role in the economic growth and development of most developing economies. This book analyzes revenues, policy, and administration of Domestic Resource Mobilization (DRM) in developing countries. It provides a broad landscape of practical examples, drawing from lessons learned in World Bank operations across Global Practices over the past several decades. It should be thought of as a starting point for a more comprehensive research agenda rather than a complete inventory itself. This book reviews the trends in tax revenue collection in developing countries. It provides an overview of efforts to close the revenue gap, many of which have been supported by World Bank operations. The book reviews the special challenges facing low income countries, which have traditionally relied on indirect revenues in the context of limited formalization of their economies. An overview of tax policy and administration reform programs is presented, with an overview of outstanding issues that will shape the policy agenda in years ahead