News: IMF: Better not to raise tax rates, but to expand the tax base

The International Monetary Fund published a report on the world activities of states and financial institutions for April of this year. The monitoring report of the IMF's tax and financial control commission notes some trends towards stabilization of global economic growth by 1.5% by the end of 2019.

The IMF believes that almost all tax reforms of states that are part of the OECD structure, regardless of the scheme of their implementation, showed a positive trend for the period from September 2018 to April 2019. Even the expansion of the tax base by applying new small and well-established tax rates and duties did not affect the tendency to return to increase.

However, the IMF Commission suggested that many states would not want to revise tax rates while stabilizing the global and domestic economies. An illustrative example of a country like Japan, where, due to the excessive tax burden on the budget and the manufacturing sector, the economy stagnated for eight consecutive quarters in 1989. However, after the adoption of the new taxation policy, there has been deflation in the country since 1994.

"Reforms that are carried out by many countries may have an adverse effect. Ultimately, many economies will suffer from a large burden on those categories that are donor budgets in many states. On this basis, the Commission recommends that attention be paid to changing the rules of the tax system rather than introducing new taxes, even if they do not affect the overall picture of taxation in each particular case," the report's preamble says.

Therefore, the IMF believes that reforms that are considering expanding the tax base may have a similar effect. They are much more benign, and at the same time do not slow down the economic growth of economies in the short term, and even accelerate and mobilize resources in the medium term.

Law and Trust International provides you with the opportunity to register a company in Japan. To get know about the cost of registration and its features, please contact our lawyers.