MULTILATERAL institutions' (MIs') periodic discourse on global fiscal reforms for sustained,inclusive economic growth is not resulting in concerted, collective action. One would arrive at this conclusion after going through documents released at the recently concluded International Monetary Fund (IMF)/World Bank (WB) annual meetings.

The unfortunate aspect of such MIs' efforts is that only a fraction of the valuable recommendations contained in their reports get implemented. A case in point is a joint report by IMF and Organisation for Economic Co-operation and Development (OECD) on 'Tax Certainty' prepared in March 2017 for finance ministers of G20 countries.

There is hardly any concerted action by G20/OECD/IMF to make 'Tax Certainty' the mantra for sustained, inclusive growth of world economy. Certain countries such as the United States and India have, on the contrary, contributed to tax uncertainty.

The US is formulating a tax incentives package whose spillover impact on other countries can't be predicted at present. India has messed up goods and service tax (GST) as symbol of botched implementation of intended good and simple tax.

Before elaborating on benefits of tax certainty, consider first the latest resolutions and suggestions. The International Monetary and Financial Committee (IMFC)has resolved that its member countries will strive to implement domestic policies that develop an adaptable and skilled workforce and enhance inclusion.

In its Communique issued after its 36th meeting held on 14th October 2017, IMFC says: "We will work together to achieve a level playing field in international taxation; address tax and competition challenges, as appropriate, raised by the digitalization of the economy; tackle the sources and channels of terrorism financing, corruption, and other illicit finance; and address correspondent banking relationship withdrawal".

At IMFC, United Nations Conference on Trade and Development (UNCTAD) contended that raising government revenue is the key to financing a global new deal.

As put by UNCTAD Secretary-General Mukhisa Kituyi: "A greater reliance on progressive taxes, including on property and other forms of rent income, could help address income inequalities. Reversing the decline in corporate tax rates should also be considered but this may be less important than tackling tax exemptions and loopholes and the corporate abuse of subsidies, including those used to attract or retain foreign investment".

Recalling the New Deal created to redevelop the World War II-battered economies in 1947, UNCTAD stated "an equally ambitious effort is needed to tackle the inequities of hyper globalization in order to build inclusive and sustainable economies".

There are no takers for the idea of New Deal in the protectionist and insular world.

IMFC, in fact, gave a lip-service to confronting global, regional and national inequalities with a passing reference: "We also support the IMF's work on inequality".

It added: "To boost productivity and promote inclusiveness, fiscal policy should prioritize high-quality investment, support structural reforms, including more efficient tax systems, and promote labor force participation".

IMFC here obviously made implied reference to IMF's Fiscal Monitor that was released two days before the Conference. This year's Fiscal Monitor focuses on Tackling Inequality. It has debated at length three means to reduce iniquitous growth: progressive taxation, universal basic income (UBI) for all persons and ramped-up expenditure on education and health.

Fiscal Monitor notes that Tax Progressivity, the degree to which the average tax rate rises with income, has declined in recent decades.

It says: "The downward trend over the past three decades is consistent with the decline in top income tax rates in advanced economies, with the average for Organisation for Economic Co-operation and Development (OECD) member countries falling from 62 percent in 1981 to 35 percent in 2015".

It adds: "Taxes on capital income play an equally important role in shaping the progressivity of a tax system. Capital income, including profits, interest, and capital gains, is distributed more unequally than labor income and has risen over the past few decades. Moreover, capital income is often taxed at a lower rate than labor income, reducing overall tax progressivity across all incomes".

At IMFC, the United States articulated its stance that is contrary to tax progressivity. As put by US Treasury Secretary Steven Mnuchin, "We should each, for instance, revisit our regulatory regimes to reduce barriers that stymie private sector investment; reassess our tax systems to ensure they provide sufficient incentives for private sector-led capital and labor mobilization; and reevaluate public sector spending policies to improve efficiency".

He contended: "In too many countries a large public sector crowds out the private sector. In others, a burdensome and inefficient tax system or excessive regulatory barriers fail to create effective incentives for private sector capital and labor mobilization".

Similarly, President of European Central Bank Mario Draghi suggested "all euro area countries should strive for a more growth-friendly composition of fiscal policies by prioritising public investment and reducing the tax burden on labour".

Whatever reduction in corporation and personal income tax (PIT) is finally approved under Trump Tax package, it would certainly nudge aside the idea of progressivity. It might well force foreign direct investment-seeking countries to align its direct taxes with revised US rates.

IMF's Spillover Task Force (STF) has already pointed out that tax incentives-induced growth stimulus in advanced countries have lesser impact on world as compared to spillover effect of their enhanced spending.

According to STF Notes on 'Fiscal Spillovers -The Importance of Macroeconomic

and Policy Conditions in Transmission', "a 1 percent of GDP spending hike in a major advanced economy can raise output in recipient countries by 0.15 percent over the first year, against 0.05 percent for a tax cut of equal size".

STF assessed spillovers from five economies-France, Germany, Japan, the United Kingdom, and the United States-on 55 advanced and emerging market economies that represent 85 percent of global GDP. Using information on bilateral trade links to inform the patterns of global and regional spillovers from the source economies, it drew general lessons about the transmission of fiscal shocks from both changes in government spending and tax revenue.

According to IMF's World Economic Outlook (WEO) Update issued on 12th October, "Model-based simulations suggest that the cross-border effects of budget-neutral fiscal reforms are generally modest, though large reforms can trigger spillovers, especially if they affect cross-border investment decisions. Overall, this evidence draws attention to the cross-border repercussions of corporate tax reform in the United States, for example, or of an increase in public investment in Germany".

WEO adds: "Model simulations suggest that temporary changes in consumption taxes have the largest domestic and spillover effects among tax instruments. Unlike cuts in labor income or corporate taxes, where benefits can be saved, households must increase their current-period spending to take advantage of temporarily lower consumption taxes. In addition, because investment decisions have a long planning horizon and investment can be costly to adjust, the impact of temporary corporate income tax changes is smaller than that of temporary labor income tax changes-the latter affect liquidity-constrained households, which fully adjust consumption in response".

WEO has thus mooted that advanced economies, having high public debt, limited fiscal space, and high tax and spending levels, should opt for revenue-neutral increases in tax progressivity, spending reallocations, and improved spending efficiency.

It suggests: "In advanced economies where tax progressivity has declined in the past few decades, raising the top marginal tax rates and reducing opportunities for tax avoidance and evasion, especially for high-income earners, could improve the distribution of income. Many advanced economies also have room to significantly increase the taxation of immobile capital and wealth".

WEO has rightly pitched for cooperation on international taxation issues. It notes that enhanced capital mobility across borders has fueled international tax competition. This, in turn, has led the governments to financing their budgets without hiking taxes on labor income or imposing regressive consumption taxes.

It believes that policymakers can make more meaningful progress towards equitable tax systems if their national efforts to safeguard revenues are backed by multilateral cooperation.

UNCTAD struck a similar chord at IMFC. It wants MIs to create a global financial register to record the owners of financial assets throughout the world to check use of tax havens by companies and high net worth individuals.

This brings us to the larger issue of coordinated action by all countries to strive towards tax stability and certainty as the key to sustained growth. The Report on Tax Certainty recommended a slew of initiatives to promote certainty in framework for assessment and collection of stable direct taxes.

As put by IMF-OECD combine, "this report represents an important opportunity for the G20 to affirm its commitment, which could for instance be included in a declaration, to enhanced tax certainty and its support for practical actions by governments, tax administrations and businesses to provide a more predictable and certain tax environment to support cross-border trade and investment and secure a more stable and predictable revenue stream for governments".

Though the Report has focused on G20 and OECD, it should be seized by all MIs as opportunity to take on board developing countries to make tax certainty as driver of inclusive growth.

Stable, robust revenue flows can help Government to step up expenditure on health, education and infrastructure and thus help reduce inequalities among citizens.

The Report concluded that "Uncertainty in the corporate income tax and the VAT systems is reported by business as having an important influence on investment and location decisions. Over 60 percent of respondents to the OECD business survey indicate that uncertainty in the corporate income tax and the VAT is very or extremely important to investment and location decisions".

The Report shows that tax certainty is a high priority for tax administrations as well. Over 80% of respondents to the tax administration survey identified certainty as a very high or extremely high priority of their tax administration.

The next annual meeting of IMF and WB should take a definitive call on tax certainty as a new pillar of global economic and financial stability.

Participants at the next round of annual meetings should also keep in mind 'G-20 Report on Strong, Sustainable, and Balanced Growth' released on 12th October.

It says: "Acting together yields benefits significantly beyond what countries would reap by acting alone. In the short term, the GDP gains across the membership from implementing the recommended policies more than double due to spillovers from other countries' actions".