FILE PHOTO: United States President Joe Biden makes remarks on the state of vaccinations for coronavirus disease (COVID-19) in the State Dining Room of the White House in Washington, DC, United States on April 6, 2021. REUTERS / Kevin Lamarque / File Photo
WASHINGTON (Reuters) – International Monetary Fund officials on Wednesday approved U.S. President Joe Biden’s plan to raise corporate taxes and negotiate a global minimum tax. Corporations and high net worth individuals that thrived during the pandemic can afford to pay more.
“The IMF has called for a global corporate tax rate to break the corporation tax race,” said Vitor Gaspar, IMF director of financial affairs, at a press conference. “And that is important to ensure that governments have the resources necessary for the various spending priorities they must serve.”
Biden’s tax plan, which is expected to be debated by G20 tax officials on Wednesday, aims to discourage multinational corporations from shifting profits to low-tax areas by setting a commonly agreed global minimum.
Paolo Mauro, the IMF’s assistant finance director, said there was an opportunity for wealthier countries to reverse the erosion of their revenues by adding a COVID-19 tax surcharge for high net worth individuals and businesses.
“In advanced economies, there is an opportunity to reverse some of this erosion through action on both corporate and other taxes such as personal income taxes or closing loopholes in capital income taxation, property taxes, and inheritance taxes. The full menu of options is available to policy makers “Said Mauro.
A corporate tax surcharge would recognize that “some companies did very well and very well in terms of stock market valuation during the pandemic,” said Mauro.
The IMF’s separately released Fiscal Monitor report recommended that countries continue to receive targeted support despite rising debt levels, particularly for vaccines, which could accelerate their economic and fiscal recovery.
Gaspar said it is important for some countries to start creating credible fiscal frameworks in the medium term for a better balance between spending and revenue. He did not give a specific period, but this could be longer for many countries.
“It will be longer in the medium term. And most countries will face growth and development challenges that will take quite a long time frame, ”he said, adding that Biden’s US infrastructure investment plan is spread out over a decade and new UK budget projections are spread out over a long period of time.
Reporting by David Lawder editing by Chizu Nomiyama