Speech

Building a Fair and Inclusive Tax System in Asia

April 25, 2024

Good morning. It is my great pleasure to welcome you to the thirteenth IMF-Japan High-Level Tax Conference for Asian Countries.

I would like to thank the Ministry of Finance for co-hosting this event and the government of Japan for their generous support.

I am also grateful to my colleagues in the IMF’s Fiscal Affairs Department and the Regional Office for Asia and the Pacific for their help organizing this event.

This is the first year since the COVID-19 pandemic that we have held the conference fully in person.

Since then, the global economy has shown surprising resilience to successive shocks. As you have seen in our latest World Economic Outlook, we expect global growth to reach 3.2 percent this year.

Asia remains the engine of growth—on track to deliver 60 percent of global growth this year.

And it is ahead of the curve on taming inflation. Most countries in Asia are expected to reach central bank targets in 2024.

But challenges remain. Providing extraordinary support in response to the pandemic and Russia’s war in Ukraine has left governments with fewer resources amid high debt and rising debt servicing costs.

At the same time, demand for public spending is growing, including in Asia—which faces aging populations and climate change.

And the lowest medium-term global growth prospects in decades mean less tax revenues to pay for it all.

In this difficult environment for government budgets, mobilizing domestic revenues is essential to meet growing spending demands and build resilience against future shocks.

Good, fair, and competitive taxation remains a key element to achieve this.

Emerging markets and developing economies can tap into their tax potential and boost their tax-to-GDP ratios by up to 9 percentage points on average.

How? By building tax capacity.

To do this, a holistic and institution-based approach is needed.

That means broadening the tax base. Rationalizing tax expenditures—which are estimated to cost between 2 and 5 percent of GDP on average—can help achieve this.

It also means improving the design and administration of core domestic taxes. This includes value-added taxes (VAT), excises, personal income taxes, and corporate income taxes.

Evasion with VAT is estimated to reduce revenue by between 2 and 4 percent of GDP. Better access to third-party information and digitalized revenue administrations can go a long way to improve this.

Digitalization can also help improve tax institutions by strengthening compliance. With sufficient staffing, professionalized services, and greater transparency, these measures can help demonstrate the gains of tax reform and show policy implementation progress.

The broader institutional context also matters. Carefully prioritizing and coordinating reforms across government agencies can create a virtuous cycle—enhanced institutions improve state capacity, which in turn increases the quality and broader acceptance of tax design.

Taken together, these steps to build greater tax capacity can help the public sector mobilize revenue to meet large spending needs—from the climate transition to achieving the sustainable development goals.

But it is not enough for taxation to be stronger—it must also be fairer. Rising inequality is a global challenge that can weaken trust in public institutions and undermine democratic governance. Progressive taxes and effective enforcement can help reduce income and wealth inequality.  

As our members navigate this challenging environment, the IMF is here to support you.

Through our policy advice and capacity development, we are helping our members improve tax policies, public spending, and revenue administration—all critical to rebuild buffers and invest in your futures.

Right here in Asia, we offer hands-on support through our regional centers in Fiji, Thailand, India, China, and Singapore. And of course, right here in Tokyo, we have the Regional Office for Asia and the Pacific, which helps promote peer-to-peer learning in the region by organizing events such as this one.

With strong financial support from donors, we delivered capacity development support to 30 of our members in the region last year—helping countries analyze tax expenditures, design and implement international taxation, digitalize revenue administration, and fight tax evasion.

Coming together—including in conferences like this one—offers the opportunity to share insights and experiences that can help us rise to the challenges ahead. Working together, we can build a brighter future for Asia and the world.