The Strategist

IMF proposes 'solidarity tax' for pandemic earners

04/08/2021 - 04:24

Countries should consider introducing a temporary additional "solidarity tax" for companies that have been able to make money from the pandemic, the International Monetary Fund (IMF) wrote in its Fiscal Monitor.

Images Money via flickr
Images Money via flickr
The IMF believes that a temporary excess profits tax could both replace regular corporate taxes and act as a supplement to them. Such a tax would ensure that businesses that thrived during the crisis contribute to the economy and would not affect companies and their employees who made minimal profits or incurred losses, the report said. The IMF noted that temporary income tax hikes on the wealthiest people in extreme situations have already been used around the world: this was done in Germany in 1991, in Australia in 2011 and in Japan in 2013.

According to the IMF, the post-pandemic world needs to increase social spending, but additional sources of fiscal revenue must be found for this purpose. Among broader measures, the IMF calls for making income taxes more progressive, and suggests paying more attention to inheritance, gift or wealth taxes. If such measures prove insufficient, the fund would allow the introduction of wealth taxes.

A temporary tax on pandemic earnings would show solidarity with those hardest hit by the crisis and help reduce social inequalities, says the IMF. A symbolic increase in levies on prosperous businesses would boost social cohesion even if there is no pressing need to replenish the budget, Vitor Gaspar, head of the IMF's Financial Relations Department, told the Financial Times. The initiative will strengthen people's perception that "everyone contributes to the recovery effort after COVID-19," the official added.