For the IMF, countries will have more incentives to raise taxes after the pandemic

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FILE PHOTO: International Monetary Fund (IMF) Managing Director Kristalina Georgieva makes remarks during a closing news conference for the International Monetary Finance Committee (IMFC), during the IMF and World Bank's 2019 Annual Meetings of finance ministers and bank governors, in Washington, U.S., October 19, 2019. REUTERS/Mike Theiler/File Photo


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FILE PHOTO: International Monetary Fund (IMF) Managing Director Kristalina Georgieva makes remarks during a closing news conference for the International Monetary Finance Committee (IMFC), during the IMF and World Bank’s 2019 Annual Meetings of finance ministers and bank governors, in Washington, U.S., October 19, 2019. REUTERS/Mike Theiler/File Photo


The debate on how finance increased public spending Derived from the containment policies after the spread of the coronavirus in the world, they also occurred within the International Monetary Fund.

In the Fiscal Monitor of the Fund released this morning from Washington where the annual Assembly is held virtually, together with the World Bank, the agency said that “Governments may also need to consider measures to improve revenue, including both increasing tax compliance and increasing taxes on the wealthiest and least affected groups, as well as reforms to modernize corporate taxation”.

nullThus he advanced with the reasoning: “Fiscal policy options include the increase in tax rates on top-tier income, capital income, high-end property or wealth ”.

When in Argentina the “Extraordinary contribution” or the “Wealth tax”, an issue that was in fact raised by UIA businessmen last week to the IMF technicians who were in Buenos Aires, the Fund is more prone to fiscal modifications that go in that direction, according to the document released this Wednesday.

In the Fiscal Monitor, the agency also considered the possibility that countries introduce changes in fuel taxes or modify the taxes paid by companies, particularly those that had “unexpected benefits during the crisis.”

“The lower level of the price of oil facilitates the increase of taxes (or reduction of subsidies) on fuel, which in emerging market and developing economies will mainly affect wealthy people,” he mentioned on the one hand.

And on business taxes, he said that work should be done on the design of international corporate taxes on the basis of multilateral cooperation to respond to the challenges of the digital economy.

“Designing corporate income taxes to adequately capture very high profits from businesses in a rapidly changing economy, including those that made windfall profits during the crisis, can help fund priority areas such as social safety nets. and health, thus safeguarding social cohesion during a crisis that has disproportionately harmed the most vulnerable groups, ”said the organization led by Kristalina Georgieva.

In a blog that accompanied the presentation of the Fiscal Monitor, this idea was summarized: “Governments must also adopt measures to improve the tax compliance and consider higher taxes for the wealthiest groups and highly profitable companies ”.

Regarding emerging market and low-income economies, he acknowledged that as they face severe financial constraints, resources must be further optimized “by establishing new spending priorities and improving their efficiency. Some may need more official financial support and debt relief ”.

In general, the IMF’s Fiscal Monitor report also details the expected projections of fiscal deficits, debt, and financing needs, among others. In full negotiation with the Fund from the Government of Alberto Fernández to obtain a new loan to repay the previous one, all these forecasts for Argentina, in particular, were left blank.

The IMF also failed to include inflation forecasts for the coming years for the country in the World Economic Outlook (WEO) released on Tuesday. He did say that the Argentine GDP this year will close with a drop of 11.8% and that the recovery for 2021 will lead the activity to have an improvement of 4.9%.

Argentina negotiates with the IMF a new loan, number 22 in the country with the Fund, to obtain the resources and repay the previous loan, for about US $ 44,000 million (to which interest is added).

Last week, Georgieva said that it is not the intention of the IMF to ask “to cut spending even more”, after the impact of the coronavirus in an economy that was already coming from two years of recession.

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