IMF Puts VAT Introduction As Priority For San Marino

by Ulrika Lomas, Tax-News.com, Brussels

18 March 2016

The International Monetary Fund (IMF) has released its 2016 Article IV consultation report for San Marino and recommended that the territory should start to reduce its fiscal deficit, with the introduction of the proposed value-added tax (VAT) being a policy priority.

The IMF noted that San Marino's economy "is bottoming out after six years of recession," and suggested a target for an overall fiscal adjustment of one percent of gross domestic product (GDP) over the four-year 2017-2020 period. While public spending is also being cut, it proposed that, beginning in 2017, government policy should also be looking "to modestly increase revenue."

It concluded that "the scheduled introduction of the VAT in 2017 remains a priority," and should "aim to increase revenues by 0.5-1 percent of GDP by setting the VAT rate a bit higher than the revenue-neutral rate."

The IMF welcomed San Marino's commitment to "rationalize and modestly reduce expenditure on public pensions and publicly financed health care benefits." However, it also noted that financial sector issues, such as the unfinished restructuring of Cassa di Risparmio della Repubblica di San Marino and a reduction in non-performing loans in the banking system, needed to be resolved quickly "to minimize contingent fiscal liabilities."

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