Governments should consider raising taxes on the wealthy to help pay for the cost of Covid, the International Monetary Fund says.
It suggested a temporary increase in taxes on wealth or high incomes could help tackle inequalities that have widened due to the crisis. In its fiscal report, it added the move would help the worst affected by the pandemic feel a sense of cohesion.
But the organization urged governments to “carefully assess trade-offs”. The International Monetary Fund (IMF) pointed to the reform of current policies on inheritance taxes or property, for example, before turning to wealth taxes.
“To help meet pandemic-related financing needs, policymakers could consider a temporary Covid-19 recovery contribution, levied on high incomes or wealth,” the report said.
Vitor Gaspar, the director of the IMF’s fiscal affairs department, added: “Pre-existing inequalities have amplified the adverse impact of the pandemic. And, in turn, Covid-19 has aggravated inequalities. A vicious cycle of inequality could morph into a social and political seismic crack.”
It said during the pandemic, younger and poorer people had suffered most, being at greater risk of losing their jobs or incomes. In the lender of last resort’s recent economic outlook report, it forecasted a stronger economic recovery than expected, both globally and in the UK, than it had done in January. It expects, however, that recoveries will diverge dangerously within and between countries too.
Countries with slower vaccine rollouts, more limited support from economic policy, and those more reliant on tourism are likely to do less well.