Oxfam claims – India received the most recommendations related to “regressive tax” from IMF

New Delhi: India received the highest number of “regressive tax” recommendations from the International Monetary Fund (IMF) between 2022 and 2024. This information was given in an analysis by international organization Oxfam. This analysis was released ahead of the spring meetings of the IMF and the World Bank in Washington (USA). It said the global body is adopting a “double standard” where it mainly gives progressive advice to rich countries, while suggesting regressive measures to other countries that “may increase inequality.”

According to the report, 59 percent of the IMF’s tax recommendations given to low- and lower-middle-income countries were regressive, while 52 percent of the recommendations given to high-income countries were progressive. Regressive tax is a uniform tax system in which the lower income group is burdened more than the higher income group. On the contrary, a tax imposed in proportion to income is called progressive. Oxfam studied 1,049 IMF tax recommendations to 125 countries between 2022 and 2024 and found that only 30 of these recommendations, or about three percent, were related to net wealth taxes and taxation of income from wealth (such as capital gains). The report said that despite the sharp increase in extreme wealth, the wealth of billionaires has increased by 81 percent after 2020. The analysis found that the US and Brazil received the most progressive tax advice from the IMF. Canada, Australia, France, Britain, the Netherlands, Switzerland, Sweden and Norway also received more progressive recommendations. Along with this, China, Kazakhstan, Angola and Botswana received similar advice.

“High-income countries generally receive IMF recommendations tilted towards progressive measures, accounting for 52 percent of the total classified advice given to these countries,” the report said. But poor countries do not get such treatment.” India, on the other hand, received the most regressive recommendations. This was followed by many other countries of the Global South.

“This regressive aspect of the tax advice for countries in the ‘Global South’ suggests that most of the measures recommended by the IMF may increase inequality in these countries, as the greater tax burden falls on middle- and lower-income groups while the richest sections remain virtually untouched,” the report said.

According to the report, the IMF’s tax advice for South Asia was “the most regressive”. This was followed by Latin America and the Caribbean region and Sub-Saharan Africa. The analysis cited the examples of Chile, Nigeria and Hungary, where the IMF recommended measures that could place a disproportionate burden on low- and middle-income groups. In Chile, where income inequality is high, the IMF recommended raising tax rates for low- and middle-income groups, while keeping rates for high-income groups the same. In Nigeria, where almost one-third of the population lives in poverty (the highest in Africa), the IMF suggested increasing the value-added tax (VAT) while in Hungary it advised against a windfall tax on energy companies.

“A progressive tax system ensures that those with higher incomes and wealth pay disproportionately more taxes than those with lower incomes,” the report said. Progressive measures such as net wealth and capital gains taxes were rarely recommended and, when made, were largely limited to high-income countries.” The report also gave examples of some countries that reflect tax policy concerns.

In New Zealand, the IMF said the corporate income tax there is “relatively high compared to similar developed economies” and recommended reducing it. In Sweden it recommended “reducing taxes on deferred capital gains” to eliminate distortions in the housing market. In the Philippines, the IMF called for broadening the VAT base by rationalizing exemptions, while in ‘Cote d’Ivoire’ (Ivory Coast) it suggested abolishing VAT exemptions and implementing statutory rates. Oxfam said that the IMF publicly acknowledges that tax policy is an important means of addressing inequality, but it links its tax advice for high-income countries to inequality far more (34 percent). Whereas for low and lower-middle income countries this figure is only eight percent. Nearly 90 percent of these countries have moderate or high levels of inequality. Kate Donald, head of Oxfam International’s Washington office, said the IMF was adopting a “double standard”, giving progressive advice to rich countries while suggesting regressive measures for others.
“The IMF is operating with a worrying double standard that calls into question its core principle of ‘equal treatment,'” Donald said. It offers mostly progressive tax advice to rich countries while its guidance for the rest of the world remains largely regressive. “The Fund must provide equally progressive tax advice to all member states or accept that its commitment to tackling inequality is merely formal.”