NEW DELHI, Apr 13: India received the highest number of regressive tax recommendations from the International Monetary Fund (IMF) between 2022 and 2024, according to an analysis by Oxfam.
The analysis, released ahead of the IMF and World Bank spring meetings in Washington, has flagged that the global body is applying “double standard” by giving largely progressive advice to wealthy countries while suggesting regressive measures for others that are “likely to exacerbate inequality”.
The report said 59 per cent of the IMF’s tax advice to low- and lower-middle-income countries was regressive, while 52 per cent of its recommendations to high-income countries were progressive.
A regressive tax refers to a uniform taxation system which burdens those in lower income groups more than high earners. In contrast, a tax levied in proportion to one’s income is termed progressive.
Oxfam examined 1,049 tax recommendations made by the IMF to 125 countries between 2022 and 2024 and found that only 30 recommendations, or around three per cent, focused on net wealth taxes and the taxation of income from wealth, namely capital gains.
The report said that despite the rapid growth of extreme wealth, billionaire wealth has surged by 81 per cent since 2020.
The analysis found that the United States and Brazil received the most progressive IMF tax advice. Canada, Australia, France, the United Kingdom, the Netherlands, Switzerland, Sweden and Norway also received more progressive recommendations, along with China, Kazakhstan, Angola and Botswana.
“While high-income countries generally receive IMF recommendations that are tilted towards progressive measures, amounting to 52 per cent of the overall total classifiable advice to these countries, poorer countries don’t seem to get the same treatment,” the report said.
On the other hand, India received the highest number of regressive recommendations, followed by several other countries in the Global South.
“This regressive aspect of tax advice for Global South countries means that most measures advised by the IMF are likely to exacerbate inequality in these countries, by placing the bulk of the tax burden on middle- and low-income people while leaving the wealthiest unscathed.”
The report said that the IMF’s tax advice to South Asia was “by far the most regressive”, followed by those suggested for Latin America and the Caribbean and sub-Saharan Africa.
The analysis cited Chile, Nigeria and Hungary as examples of countries where the IMF recommended measures that could disproportionately burden low- and middle-income groups.
In Chile, with one of the highest levels of income inequality, the IMF advised raising tax rates for low- and middle-income groups while leaving rates on top income brackets untouched.
In Nigeria, where nearly one-third of the population lives in poverty (the highest rate in Africa), it suggested increasing value-added tax, while in Hungary, it advised against a windfall profit tax on energy companies.
“A progressive tax system ensures those who have higher income and more wealth pay proportionally more taxes than those who have less. Progressive tax measures like net wealth and capital gains taxes were rarely recommended, and when they were, advice was concentrated in high-income contexts,” the report said.
The report also highlighted several country cases reflecting concerning tax policy advice. In New Zealand, the IMF expressed concern that the corporate income tax in the country is “relatively high compared to peer advanced economies” and advised the government to lower it.
In Sweden, it recommended “lowering taxes on deferred capital gains” to address distortions in the housing market. In the Philippines, the IMF called for broadening the value-added tax base by rationalising exemptions, while in Cote d’Ivoire, or the Ivory Coast, it recommended eliminating VAT exemptions and applying statutory VAT rates.
Oxfam said the IMF publicly acknowledges that tax policy is a critical tool for addressing inequality, but it links its tax advice to inequality far more often for high-income countries (34 per cent) than low- and lower-middle-income countries (8 per cent). Nearly 90 per cent of low- and lower-middle-income countries have medium or high inequality.
Kate Donald, Head of Oxfam International’s Washington office, said the IMF was applying a “double standard” by giving largely progressive advice to wealthy countries while continuing to recommend regressive measures elsewhere.
“The IMF is operating with a troubling double standard that calls into question the evenhandedness it holds as a core principle. It offers mostly progressive tax advice to rich countries, yet its guidance for the rest of the world remains largely regressive. The Fund must provide equally progressive tax advice to all members, or admit its commitment to tackling inequality is merely rhetorical,” Donald said.
Oxfam’s analysis also found that only 10 per cent of the IMF’s recommended tax reforms referred to gender inequality, and most of those references amount to just a few sentences. More than 90 per cent of the IMF’s tax guidance focused on tweaking existing measures, it said.
Oxfam urged the IMF to “systematically place inequality at the heart of all fiscal advice”, defaulting to revenue-raising policies that enhance the progressivity of national tax systems.
It said the fund should discourage over-reliance on consumption taxes and other regressive measures that disproportionately burden low-income households.
The organisation also called on the IMF to ‘conduct and publish rigorous distributional impact assessments’ of all tax and fiscal advice in its Article IV reports – the IMF’s usually annual assessments of member countries’ economies and policies -to ensure recommendations do not exacerbate inequality.
Oxfam further urged the IMF to significantly broaden recommendations for taxing high-net-worth individuals and wealth, while actively supporting measures to curb corporate tax avoidance and harmful competition.
It also asked the Fund to develop a “centralised, user-friendly database” to track and publicise the tax advice provided in Article IV reports. (PTI)
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