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IMF Proposes Higher Rate VAT For San Marino

by Ulrika Lomas,, Brussels

02 February 2015

The International Monetary Fund has recommended that San Marino should finalize a multi-year fiscal strategy, to be introduced in 2016, which will likely include the implementation of proposals under development for a value-added tax.

The IMF reported that San Marino has made "very significant progress to normalize international relations and emerge from a deep recession." On the back of the inclusion in Italy's tax whitelist and the conclusion of financial and economic cooperation agreements with Italy, there are signs that the economy is stabilizing, it said.

Still, the IMF said serious policy challenges remain: "The fiscal efforts of the last two years represent important steps to begin rebuilding the buffers that served San Marino well during the crisis. Without them, the crisis would have been even deeper and the state could not have cushioned social expenditure. Gradually rebuilding these buffers as growth returns is important to be able to deal with future shocks."

The IMF said: "The design of a multi-year fiscal strategy should begin now, with implementation starting in 2016 once the economy is solidly growing again. The recent well-designed income tax reform and the planned introduction of a VAT represent important steps in this direction, it said.

The Fund has recommended a further fiscal adjustment worth about 2.5 percent of gross domestic product over the next five years. It said a real estate tax would be the optimal choice to increase tax revenue. Alternatively, it suggested authorities could consider a slight increase in the envisaged VAT rate.

Late last year, it was reported that San Marino completed a feasibility study on the replacement of the single-state tax with VAT and a draft law had been finalized.

TAGS: VAT rates | tax | value added tax (VAT) | law | agreements | Italy | tax reform | San Marino

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