This paper should not be reported as representing the views of the IMF. The views expressed in this paper are those of the authors and do not necessarily represent those of the IMF or IMF policy. Tax administration reforms can play an important role in fiscal adjustment. This role is examined by reviewing Indonesia's tax reform cum fiscal adjustment experience since 2001. The paper describes Indonesia's fiscal adjustment strategy, its tax administration reforms, and assesses the impact of these reforms on fiscal adjustment. Evidence suggests tax administration improvements had a strong positive impact on the tax yield and a positive effect on the investment climate. Lessons are presented for designing tax administration reforms within the context of a fiscal adjustment program and reform priorities are identified for Indonesia's ongoing efforts to strengthen tax administration.

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.This paper revisits earlier studies on the determinants of tax amnesties. The novel findings are (i) amnesties are more likely to be declared during fiscal stress periods, and (ii) political factors significantly affect the introduction and timing of amnesties. In particular, the paper empirically disentangles opposite theoretical effects to show that governors perceive amnesties as another revenue source (rather than a tax increase alternative). Finally, supporting evidence shows that by breaking horizontal equity, amnesties might be perceived as unfair: a significant correlation exists between governors who lost their reelection bids and the introduction of a tax amnesty during their election years.

This paper studies a principal-agent model of the relationship between office-holder and an electorate, where everyone is initially uninformed about the office-holder’s ability. If office-holder effort and ability interact in the determination of performance in office, then an office-holder has an incentive to learn, i.e., raise effort so that performance becomes a more accurate signal of her ability. Elections reduce the learning effect, and the reduction in this effect may more than offset the positive “re-election concerns” effect of elections on effort, implying higher effort with appointment. When this occurs, appointment of officials may welfare-dominate elections. Copyright Springer Science + Business Media, Inc. 2006

We investigate whether relevant private information about citizens' competence in political office can be credibly revealed by their entry and campaign expenditure decisions, as opposed to choice of policy once in office. We find that this depends on whether voters and candidates have common or conflicting interests; only in the former case can entry be revealing in equilibrium. We apply these results to Rogoff's (1990) model of the political budget cycle, allowing for candidate entry, as well as elections: as interests are common, low-ability candidates are screened out at the entry stage, and so there is no signaling via fiscal policy (i.e. no "political budget cycle"). In a variant of the Rogoff model where citizens differ in honesty, rather than ability, interests are conflicting, and so the political budget cycle can persist in equilibrium.