IMF calls for tax reforms to boost productivity

International Monetary Fund (IMF) on Thursday called on nations to improve the design of tax system in order to increase productivity.

In the analytical chapters of its flagship Fiscal Monitor report, the IMF said that badly designed policies, such as tax incentives that depend on firm size or type of investment, weak tax enforcement and tariffs applied to particular goods, have constrained the increase of productivity.

Its research found that weak tax administration, such as tax evasion, not only hurts revenue collection, but also hurts productivity.

It also found that eliminating such barriers would lift annual real GDP growth rates by roughly 1 percentage point over 20 years.

It suggests authorities should seek to minimize differentiated tax treatment across assets and financing, and level the playing field across firms to encourage growth of productive firms.

"Tax reform priorities for each country will need to take into account not only their impact on productivity, but also other government objectives, including better income distribution and revenue mobilization needs," it added. Endi