Tax systems encourage credit boom, says IMF

The International Monetary Fund (IMF) has recommended countries amend tax policies in an attempt to discourage borrowing with debt rather than equity.

This systemic approach taken by tax administrations around the world has contributed to the unsustainable credit boom, according to ft.com

Michael Keen, assistant director of tax policy at the IMF's fiscal affairs department, said while this is not to blame for the global financial crisis, 'we do see some tax fingerprints at the scene of the crime.'

The IMF has recommended governments amend tax policies through the elimination of the deductibility of interest payments, or adopt a deductibility for the notional cost of equity financing.

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