Global financial chiefs have suggested that they may look to more aggressive tax collecting measures in advanced economies as a means to dig the world economy out of a “disturbing” impending coronavirus pandemic-induced debt hole.
The comments were made at a virtual summit of the International Monetary Fund (IMF), streamed online, during a seminar named “Averting a COVID-19 Debt Trap” today. Attendees addressed possible ways “to contain debt risks through better debt architecture and transparency” and asked how “global cooperation” might help alleviate the problem.
The IMF’s Managing Director, the Bulgarian economist and the former CEO of the World Bank Kristalina Georgieva, claimed that the world had “entered the pandemic with high levels of debt,” with 56% of low-income countries at risk of or already in the grips of “debt distress.”
She added that the risk for developing countries was twofold: With a slower rollout of vaccines than richer economies, lower-income areas would likely “lag in years behind advanced-economy countries without support.” And, she opined, good economic news “for some” could “turn into bad news for others.” A faster United States recovery, she added, “may push up interest rates, increasing the debt burden for developing world.”
Indeed, the IMF’s latest projections saw global GDP forecasted to rise by over 6% this year, dropping down to just under 4.4% in 2022 – after global output dropped by 3.3% in 2020. America, though, is expected to outstrip the global average with 6.4% growth, while the pace of growth will be the lowest in Sub-Saharan Africa, at just 3.1%.
But Georgieva indicated that IMF’s “path forward” involved “more grants and increased support” to “bring down [poorer countries’] debt levels.” And with the 30-or-so poorest nations temporarily not currently paying back IMF loans due to the economic fallout of the pandemic, she called on advanced countries to ensure “all hands” were “on deck.” And this, she claimed, involved governments to “collect taxes more effectively.”
Her comments came hot on the heels of calls for international tax reform from Janet Yellen, the American Treasury Secretary. Yellen has recently spoken of her desire to see a “global corporate tax” system put into place.
AP quoted the Treasury chief as stating she wanted to “make sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods.”
Many governments have already sought to bolster the public coffers by clamping down on crypto tax evasion – and imposing capital gains and income tax levies on crypto-related profits.
Experts recently told Our that bitcoin (BTC) could become a “safe haven” if the debt crisis escalates – with even a possible selloff likely followed by people returning to BTC at a later date.
Georgieva added that transparency would be key in its approach to global debt. She said that the IMF “must press very hard to make it so that mountains of debt that are often hidden” were made public, and “expose” debt contracts and some of their often “ridiculous conditions.”
She also talked about building a common framework for creditors and “making it stick” for traditional lenders as well as a new breed, including possible private-sector creditors, and parties from countries like “China and Turkey.”
“[These countries] need new liquidity yesterday. […] The private sector needs to come to the markets – and do so at the right cost. We can reduce the cost of market access. […If not,] 170 million people may fall into poverty. Can we really afford to let so many people fall into poverty?”