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IMF Supports Work To Broaden Developing States' Tax Bases

by Mike Godfrey, Tax-News.com, Washington

10 July 2015


The Managing Director of the International Monetary Fund (IMF), Christine Lagarde, has said that developing countries should prioritize measures to boost their tax revenues, to support sustainable growth.

In about half of all developing countries, tax ratios are below 15 percent of gross domestic product (GDP), compared with an average of 34 percent in Organisation for Economic Cooperation and Development (OECD) countries, Lagarde said in a speech on July 8, 2015, ahead of a UN development conference scheduled to begin on July 13. She noted that the situation is even worse in some fragile states.

"By implementing tax systems that are simple, broad-based, and fair, this can be turned around," the Managing Director said.

She highlighted an IMF study that found that Fund-supported programs with revenue conditionality helped implementing countries increase their revenue by one percentage point of GDP a year after the program was put in place. She said that after three consecutive years of a program, tax revenues increased by 3.5 percentage points of GDP.

According to Lagarde, the IMF will help more countries mobilize domestic revenues, and then repurpose these resources to tackle poverty and drive sustainable growth. She said that additional resources will be allocated to this area, which already accounts for one-fifth of IMF capacity building.

TAGS: tax | economics | fiscal policy | revenue guidance | gross domestic product (GDP) | International Monetary Fund (IMF) | tax reform

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