The IMF suggests taxing those who have benefited from the COVID pandemic.
4 April 2021
So I guess that would be the companies that had just a part of their organisation drop 30% in turnover for a short period, and then claimed for the whole company for a long time- the people mentioned in Michael West’s article yesterday. Here is the article below from the SMH today. And yes, it is the IMF, hardly a Leftie organisation suggesting this, though the Greens did also.
Tax those who prospered during pandemic to repair budget: IMF
Shane Wright, 4 April 2021
Sydney Morning Herald, Senior economics correspondent
The International Monetary Fund has urged nations to consider using the Abbott government’s temporary budget repair levy to overcome the huge deficits left by the coronavirus recession, warning deep cuts to spending could lead to political instability.
Amid predictions Australia’s budget deficit could be $50 billion less than feared, the IMF has also suggested taxes on “excess” profits such as the abandoned mining resource rent tax.
Governments around the world have all been forced to run huge deficits to deal with the COVID-19 outbreak, with collective deficits approaching 13 per cent of global GDP. Australia’s deficit, forecast to reach $197.9 billion this financial year, is close to 10 per cent of GDP.
The IMF, in its fiscal monitor report ahead of this week’s world economic outlook, said that while governments had been forced to run large deficits there had also been an increase in income and wealth inequality because of the pandemic.
It said governments faced difficult decisions on how to cover their large deficits while also not exacerbating inequality.
Among budget repair options, the IMF said those nations with “robust tax systems” could look to increase top personal income tax rates, similar to the budget repair levy put in place by the Abbott government in 2014.
“Temporary increases in personal income tax rates (often restricted to the highest income brackets) were previously introduced during exceptional circumstances in Germany, Australia and Japan,” it said.
The budget repair levy, which was a 2 per cent impost on people earning more than $180,000 a year, ran between 2014 and 2017, raising more than $3 billion to help reduce the budget deficit.
The IMF said another option was to tax so-called “economic rents” or super-profits, targeting those sectors that had done well during the pandemic.
“Taxes on ‘excess’ profits, either in addition to or instead of the regular corporate income tax, can assure a contribution from businesses that prosper during the crisis (such as some pharmaceutical and highly digitalised businesses) and not affect companies (and their workers) otherwise earning minimal profits or incurring losses,” it said.
The fund warned trying to repair budgets by cutting expenditure on services or support to those left behind by growing inequality could lead to substantial political problems.
The Morrison government has pledged not to increase taxes, as the Abbott government pledged ahead of the 2013 election.
Very high iron ore prices, strong GST returns and a better-thanexpected economy are already reducing the budget deficit.
Deutsche Bank economist Phil Odonaghoe said it was not inconceivable the deficit could be half of what had been predicted in the mid-year update.
He cautioned everything would have to go right for that to occur, which would result in a deficit of about $100 billion. Even that would still be a record budget shortfall.
Mr Odonaghoe said a deficit of about $150 billion was more likely, which would set up the budget for future years. “The better starting point in 2020-21 also means smaller deficits across the forward projection period. On our revised profile, the federal budget could conceivably return to balance by 2025-26,” he said.
ANZ economists Hayden Dimes and David Plank said the deficit would be as low as $155 billion because of the better expected economic conditions.
But they cautioned some of this improvement was due to GST receipts.
Due to the way the GST is refunded to the states and territories, the better revenue this financial year could end up a shortfall in 2021-22.