Corruption and fair tax highlighted as IMF priorities for Japan and Asia

25 Apr 19

The global economy is suffering from uncertainty with growth stalling last year, and rising inequality leading to eroding trust in international institutions.

That was the stark message of the opening address to the IMF-Japan High-Level Tax Conference for Asian Countries.

Mitsuhiro Furusawa, IMF deputy managing director, told the event that reducing corruption was key to the IMF’s work in the region.

He commented: “Corruption distorts taxpayers’ money away from schools, roads, and hospitals, and undercuts governments’ ability to achieve sustainable and inclusive growth.

“Ultimately, it erodes peoples’ trust in government and institutions.”

He told the conference that the latest IMF fiscal monitor, which had analysed more than 180 countries, had found that countries that managed to reduce corruption significantly were rewarded with higher revenues. For example, in Georgia, tax revenues had more than doubled, rising by 13% of GDP, following aggressive reforms to fight corruption.

IMF figures at the start of this year also showed global expansion had weakened. Global growth for 2018 was estimated at 3.7% - the same as 2017 - in the organisation’s October 2018 World Economic Outlook, released in January. 

The global economy is projected to grow at 3.5% in 2019 and 3.6% in 2020, 0.2 and 0.1 percentage point below last October’s projections, according to the outlook. 

Furusawa added: “We have been deeply engaged with our members in building effective institutions and improving public sector governance through policy advice and diagnostic tools.”

The IMF’s tax tools, he said, could help countries assess the health of key components of their tax administration systems and estimate the extent of non-compliance for major taxes.

Achieving fairer international taxation system, he explained, was also a top priority for the IMF, especially for low-income countries which relied on corporate income taxes as a source of revenue.

He said that national taxation systems were often under pressure to attract direct investment from multinational companies through favourable tax regimes. This encouraged unwelcome practices such as profit shifting and tax competition and deprived them of much-needed revenues.

The IMF, he said, was leading on measures to deal with the problem, notably through its G20-OECD base erosion and profit shifting project. This had produced multinational agreements on improved standards for transfer pricing and treaty abuse.

Now in its tenth year, IMF-Japan’s High-Level Tax Conference for Asian Countries provides a platform for tax officials in Japan and Asian region to share experiences and deepen collaboration on common challenges in tax policy.

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