IMF staff on Japan

For another example of really bad analysis from the IMF (2011), see:

“ Raising the Consumption Tax in Japan: Why, When, How?”
http://www.imf.org/external/pubs/ft/sdn/2011/sdn1113.pdf

Some quotes from the summary:
“ [IMF] Staff analysis reported here suggests that a gradual increase in the consumption tax [in Japan] dfrom 5 percent to 15 percent over several years—a level that is still modest by OECD standards—could provide roughly half of the fiscal adjustment needed to put the public debt ratio on a downward path within the next several year.”

“Experiences elsewhere, as well as the specific circumstances of Japan, suggest that the strategy for raising the consumption tax be guided by the “four Ss”—it should start Sooner rather than later, be raised by Stepwise increases, Sustained for some time, and retain the very Simple current structure of the consumption tax: [….]”

“Japan’s experience in raising the consumption tax will set an important example for other countries.”

My comments: (1) The IMF staff has not learnt anything from Japan’s own experience in raising tax rates of later 1990s and early 2000s. (2) Start sooner = in the middle of a recession!

Tanweer Akram

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