IMF backs Biden’s plans for higher taxes and surcharges for the rich

Photo: AP Joe Biden

The International Monetary Fund expressed support for the proposals of US President Joe Biden to increase corporate taxes and go further by agreeing a global minimum tax, Reuters reported. The Fund also noted that it was fair enough to impose higher taxes on wealthy firms and rich individuals who cashed big profits in pandemic and therefore can afford to pay more.

“The IMF has been calling for a minimum global corporate income tax rate as a way to interrupt the race to the bottom in corporate income taxation,” IMF Fiscal Affairs Director Vitor Gaspar told a news conference. “And that is something which is important to ensure that governments have the resources needed to the various spending priorities that they have to serve.”

Biden’s tax plan, which is expected to be discussed by G20 finance officials, seeks to deter multinational companies from shifting profits to low-tax jurisdictions by setting a broadly agreed global minimum. Paolo Mauro, the IMF deputy fiscal director, said there was an opportunity for wealthier countries to reverse the erosion of their revenues by adding a Covid-19 tax “surcharge” for wealthy individuals and corporations. “In advanced economies, there is an opportunity to reverse some of that erosion through action, both on the corporate income tax, and also other taxes such as personal income taxes or closing loopholes in capital income taxation, property taxes, inheritance taxes so there’s a whole menu of options available to policymakers,” Mauro said. A corporate tax surcharge would recognize that “some corporates have done very well and have done very well in terms of stock market valuation” during the pandemic, Mauro said. The IMF’s Fiscal Monitor report, released separately, recommended that despite rising debt levels, countries continue targeted support, especially for vaccines, which could accelerate their economic and fiscal recoveries.

Gaspar said that it was important for some countries to start to build medium-term fiscal credible frameworks for more balance between spending and revenues.

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