Abstract
Fiscal consolidation needs to look beyond the usual fiscal measures of increasing taxes and widening the tax base (regardless of ability to pay) and increasing interest-based borrowing (regardless of the distributional implications). A flat tax structure could improve compliance and tax collection. The imposition of tax on wealth presents additional revenue imposed on the more able segment of the population. A financing policy based on a system of risk sharing promotes financial inclusion instead of advantaging certain groups (financially able debt holders) at the cost of others within the society. Risk-sharing fiscal policy instruments can be utilized by the central bank in designing and implementing risk-sharing Islamic monetary policies. This increases trust, transparency, cooperation, and coordination among the people and between the people and the government.
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Othman, A., Mat Sari, N., Alhabshi, S., Mirakhor, A. (2017). Policy Recommendations. In: Macroeconomic Policy and Islamic Finance in Malaysia. Financial Institutions, Reforms, and Policies in Muslim Countries. Palgrave Macmillan, New York. https://doi.org/10.1057/978-1-137-53159-9_8
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DOI: https://doi.org/10.1057/978-1-137-53159-9_8
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