According to the latest IMF Fiscal Monitor, a report issued twice each year by the organization, controlling the global health crisis through inoculations would yield more than $1 trillion in additional tax revenue for advanced economies by 2025. Globally, vaccination would "more than pay for itself," providing excellent value for public investment in production and distribution of vaccines against COVID-19, the IMF report said. COVID-19 is the respiratory ailment caused by the coronavirus.
The report noted that the pace of inoculations continues to vary widely among countries, with many having had no access to vaccines so far. Until the pandemic is brought under control everywhere, the IMF report's authors said, taxation and spending by governments "must remain flexible and supportive of health care systems, households, viable firms and the economic recovery."
Uneven access to vaccines highlighted the report's finding that inequality had worsened in the year since the coronavirus was detected, prompting the authors to argue for higher taxes on rich individuals' incomes or wealth to meet economic costs from the pandemic. This "temporary COVID-19 recovery contribution" would, among other changes to national and international taxes, increase money for expanded public services, strengthen countries' social welfare programs and further sustainable-development goals agreed to via the United Nations.
"The need and scope for support varies across economies, depending on the effect of the pandemic and the ability to access low-cost borrowing," the IMF report said.
The report said governments of advanced-economy countries this year are implementing spending and revenue measures that on average equal 6% of their gross domestic product. In countries deemed emerging-market economies and in low-income developing countries, government efforts to counter the pandemic have been smaller and largely front-loaded, with many measures already expiring, the report said.
Tax policies devised to address pandemic costs offer governments a chance to "reverse some of the erosion" in recent years of both corporate taxes and taxes paid by individuals at the top of the income scale, said Paolo Mauro, deputy director in the IMF's fiscal affairs department.
Mauro, answering a question at an online news conference to present the Fiscal Monitor, described the possible scope of taxes that wealthier countries might levy on rich individuals and on companies that have prospered amid the crisis. Options available to policymakers, he said, include temporary surcharges on personal income tax rates, "closing loopholes" in capital income taxation and increased property and inheritance taxes.
"There's a very important international initiative now in that direction, to come to an agreement" on restoring the tax base in advanced economies, Mauro said. He was referring to talks led by the Organization for Economic Cooperation and Development that on Wednesday prompted finance ministers of the Group of 20 leading economic powers to express confidence a deal could be reached by midyear.
Economic inequalities that existed before the pandemic, both among and within countries, have intensified because of the crisis, both Mauro and Vitor Gaspar, the IMF's fiscal affairs chief, said during Wednesday's news conference. Gaspar warned that if those gaps aren't remedied, a cycle of inequality, particularly among the poor and vulnerable, could lead to social and political upheavals.
The IMF's latest Fiscal Monitor said governments on average racked up debt equal to an unprecedented 97% of their GDP last year because of pandemic-related spending on public health and to help industries battered by lockdowns. The ratio is projected to stabilize at around 99% of GDP in 2021, according to the report.
As of mid-March, countries had announced $16 trillion in "fiscal actions" over the past year to counter pandemic effects, the report said.
--Editing by Neil Cohen.
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