This Selected Issues paper describes Palauas fiscal challenges and policy options to achieve long-term fiscal sustainability. Palau relies heavily on compact grants, and without continued fiscal consolidation over the medium term, the fiscal position will become unsustainable after these grants expire in FY2024. The fiscal sustainability analysis uses an intertemporal budget constraint model to show that reducing the current deficit excluding grants by about 8 percentage points of GDP during FY2014a19 would ensure Palauas long-term fiscal sustainability. The paper also discusses the role of tourism in Palau and identifies policy priorities to further promote this sector and sustain growth.The wage and salary tax rate for low income households could be reduced to offset a potential adverse impact of price ... Tax reforms measures, as recommended by the TA, and improvements in nontax administration could raise domestic revenue by 4 ppt of GDP during FY2014a19. Containing the growth of the wage bill below the inflation rate, complemented with civil service reforms, could reduceanbsp;...
|Title||:||Republic of Palau: Selected Issues|
|Author||:||International Monetary Fund. Asia and Pacific Dept|
|Publisher||:||International Monetary Fund - 2014-05-06|