The International Monetary Fund (IMF) has pointed out the need to mobilize the tax revenues necessary to address the increased public spending as a result of the Covid-19 pandemic, for which it proposes that in advanced countries it can be applied temporarily to companies and people with higher incomes a surcharge that contributes to reducing fiscal erosion and reducing inequality, as well as acting on taxes such as wealth or inheritance.
The IMF raises the growth forecast to 6.4% for Spain in 2021
“To help meet pandemic-related funding needs, policymakers could consider a temporary recovery contribution from Covid-19, which weighs on higher income and wealth,” the Fund notes in the latest. edition of his report ‘Fiscal Monitor’.
In this sense, the institution considers it necessary to undertake fiscal reforms both domestically and internationally in order to obtain the necessary resources to improve access to basic services and social safety nets, as well as to revitalize efforts to meet the Goals. of Sustainable Development.
The IMF recalls that these types of temporary supplements to personal income tax, often restricted to the highest income brackets, were previously introduced during exceptional circumstances such as in Germany due to the reunification of the country, as well as in Australia (2011) or Japan (2013).
Likewise, the Fund considers that a tax on excess profits of companies, those that exceed the minimum required by investors, can help guarantee a contribution from companies that have prospered during the crisis, such as some pharmaceutical companies or highly digitized companies. , without affecting others with minimal gains or losses.
In the press conference after the presentation of the report, the deputy director of the IMF’s Fiscal Affairs Department, Paulo Mauro, stressed the need to obtain additional tax revenue to cover spending on health, education and social protection networks, adding that countries will have to address this problem in different ways.
“In emerging and low-income economies, the priority will be to improve tax administration and collect more consumption taxes, while in advanced economies we see an erosion of corporate tax revenue and we also see an erosion in tax collection. income of the people in the highest part of the wealth scale, “he explained.
In this way, Mauro has pointed out that in advanced economies there is an opportunity to reverse some of this fiscal erosion by introducing measures in corporate tax or other taxes such as income, wealth or inheritance taxes, as well as closing tax loopholes. “There are many options available,” he added.
In this sense, the IMF official has indicated that a specific option would be “a contribution to the recovery of Covid-19 that could take the form of a supplement to income tax or corporate tax given that some companies They have done very well in terms of their market valuation and there would be an opportunity. ”
Risks and social discontent
The Fund has also warned that the uncertainty surrounding fiscal forecasts is “unusually high” and that it is subject to both upside (improvements) and downside (deterioration) risks. In the case of possible positive surprises, the IMF identifies a vaccination campaign that is faster than expected, which would raise the income of the countries and reduce the need for new stimuli.
On the contrary, the negative risks for forecasts are more numerous. The first of these identified by the IMF is a longer economic slowdown, due in part to the fact that growth is affected by new lockdowns, delayed vaccination or less effective vaccines against new variants of the virus. “A premature reduction in political support could possibly cause loss of employment and income,” the IMF warned.
The international organization has also identified as risks an “abrupt” tightening of financial conditions, a new increase in the volatility of raw material prices and an increase in “social unrest.”
“Social tensions could erupt as the pandemic or an inadequate political response (including unequal access to vaccines) leads to more deaths or economic difficulties,” the IMF warned. Among these “difficulties” are unemployment, poverty, malnutrition, inequality, lack of food or rising prices.
“These factors could weaken confidence in governments and political effectiveness and put public finances at risk,” the Fund added.