(Washington) Faced with emptying state coffers, the International Monetary Fund on Wednesday presented its recipe for fighting the crisis: increasing taxes on the richest and on companies that made big profits during the epidemic in order to continue supporting the most vulnerable.
COVID-19 has paralyzed entire sectors of the global economy and hit the less skilled, but some companies, like the tech giants, have done well in the past year, boosting profits, as the world is completely digitized due to containment measures.
In the United States especially, some already well-off families have continued to grow richer: they have managed to keep their telecommuting jobs, increasing their shares in the stock market and saving by spending less on entertainment and travel.
Stock prices have risen around the world, especially among high-tech companies, throughout the pandemic, and have accelerated in recent weeks to new consecutive records as the global economy shows signs of a strong recovery from the pandemic recession.
“The epidemic has increased inequalities,” said Paulo Mauro, a budget officer at the International Monetary Fund, at a news conference at the Spring Meetings.
While the recovery is here, millions of people are still without jobs and resources.
Governments must continue to provide financial support. Mr Mauro added that it was therefore necessary to “mobilize additional tax revenue” to redistribute it through health care, education and social safety nets.
To do so, the International Monetary Fund is recommending, as it did in October, a temporary tax on top incomes be introduced to help governments meet these financing needs.
Pointing to an erosion of corporate income tax revenues in advanced economies in recent years, Mauro praised the international initiative to “reach agreement” on taxing the corporate income tax, the global minimum tax.
US Treasury Secretary Janet Yellen highlighted the initiative this week, quickly backed by countries such as France and Germany.
“We’ve also seen erosion of personal income taxes for people at the top of the income scale,” said Paulo Mauro.
“There is an opportunity to reverse this trend in advanced economies through increasing personal income taxes for companies and the wealthy, eliminating tax loopholes, and increasing real estate or inheritance taxes,” he said.
“So there is a whole bunch of options available,” he said.
He said the temporary tax to recover from COVID-19, which will be subject to an additional corporate tax, would make sense especially for companies that made more profits during the crisis, referring to giants like Amazon.
Amazon President Jeff Bezos confirmed on Tuesday that he supports the idea of increasing corporate taxes in the United States while President Joe Biden denounced last week that the group does not pay any federal tax on its profits.
For his part, the head of budgetary affairs at the International Monetary Fund, Vitor Gaspar, defended vaccination in all directions to get countries out of the crisis.
More than a trillion dollars in additional tax revenue could be generated by 2025 globally if all countries were able to bring the epidemic under control sooner than expected.
This would also “save billions in additional aid measures” for saving, as the International Monetary Fund notes in its report on budget monitoring released on Wednesday as part of the Spring Meetings.
The authors comment, “Vaccination is thus more than cost-effective, as it provides excellent value for money for public funds invested to accelerate global production and distribution of vaccines.”