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Governments should look to remove tax policies that distort business decisions, to unlock higher economic growth, a new paper from the International Monetary Fund says.
"Upgrading the design of their tax systems can help countries chip away at resource misallocation by ensuring that firms' decisions are made for business and not tax reasons," the IMF said.
It said that governments should focus on tackling disparities in the tax treatment of different asset classes and companies in particular. "This approach would help tilt firms' investment decisions toward assets that are more productive, rather than more tax-favored," it explained.
It concluded that tax relief should be offered to new rather than small firms to avoid the "small business trap."
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