Tax systems encourage credit boom, says IMF
Global tax administrations have fuelled excessive borrowing, and according to the IMF, this needs to change
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
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.