IMF Says Better Tax Design Can Boost Global GDP

The International Monetary Fund announced on Monday that governments can increase revenue and economic growth without raising statutory tax rates by improving the design of their tax systems. In its Fiscal Monitor publication, the organization argues that avoidable distortions currently restrain global growth.

Key findings indicate that restoring value-added tax neutrality by limiting exemptions and fully crediting input taxes can yield welfare gains of up to 0.8% of GDP. The IMF also found that corporate tax systems allowing the immediate deduction of investment costs could increase long-term capital stock by 6.4% in advanced economies and 8.2% in low-income developing economies, potentially raising GDP output by 2.1% to 2.7%.

Additionally, the organization noted that stronger tax administration can mobilize more revenue by narrowing compliance gaps. These findings were released ahead of the IMF-World Bank annual meetings scheduled for next week in Bangkok.