IMF officials back Biden’s corporate tax hike, global minimum plan

International Monetary Fund officials on Wednesday endorsed U.S. President Joe Biden’s plan to raise corporate income taxes and negotiate a global minimum tax. REUTERS FILE

WASHINGTON -International Monetary Fund officials on Wednesday endorsed U.S. President Joe Biden’s plan to raise corporate income taxes and negotiate a global minimum tax, adding that companies and wealthy individuals that have prospered during the pandemic 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 on Wednesday, 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. He did not specify a specific time period, but this could take longer for many countries.

“The medium term is getting longer. And most countries will face growth and development challenges that require quite a long time frame,” he said, adding that Biden’s U.S. infrastructure investment plan is spread over a decade and new UK budget projections are spread over a long period.