Opening Remarks by the Deputy Managing Director Kenji Okamura at the Twelfth IMF-Japan High-Level Tax Conference for Asian Countries
IMF News, October 25, 2022
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- Published: October 25, 2022
Introduction
- Event: twelfth IMF-Japan High-Level Tax Conference for Asian Countries.
- Location and date: Tokyo, Japan — October 25, 2022.
- Acknowledgements:
- Co-host: Japan’s Ministry of Finance (acknowledged for generous support and commitment to technical assistance).
- IMF Fiscal Affairs Department (organizational leadership).
- IMF Regional Office for Asia and the Pacific (support).
- Speaker background note: Kenji Okamura referenced a personal attachment to the event as a former member of Japan’s Ministry of Finance.
Global Outlook
- Current context: global slowdown of the world economy.
- Concurrent shocks cited:
- Economic, geopolitical, and ecological shocks driving turbulent global waters.
- Inflation at levels not seen in decades, squeezing household budgets and pressuring central banks to accelerate monetary policy normalization.
- Russia’s war in Ukraine and other security issues provoking geopolitical dislocations and risking fragmentation of global trade networks.
- COVID-19 pandemic: most acute phase seems over, but local and regional outbreaks may continue to disrupt economic activity.
- Natural disasters linked to climate change exerting an increasingly heavy human and economic toll.
Policy Priorities
- Primary macroeconomic priority:
- Bring inflation and inflation expectations under control.
- Acknowledged trade-off: taming inflation will come at a cost in terms of slower growth and less employment in the near term.
- The appropriate path of anti-inflation policies is country specific.
- Risks highlighted:
- Global tightening cycle can have repercussions for emerging market and developing economies, especially those with elevated external debt levels and other balance sheet vulnerabilities.
- Fiscal policy recommendations provided during the recent Annual Meetings (as summarized):
- Fiscal policy should focus on protecting the vulnerable.
- Targeted cash transfers to those particularly exposed to higher energy and food prices are called for.
- Avoid broad price caps or food and energy subsidies.
- Rationale: they remove incentives to adjust behavior and thus reduce the necessary adjustments to demand and supply.
- New spending should, in most cases, be offset by savings elsewhere to limit the fiscal impact on inflation and debt levels.
- Reforms to increase revenue generating capacity are critical.
- Examples: broadening tax bases and enforcing better compliance.
- IMF role:
- The IMF has been supporting countries in efforts to strengthen revenue mobilization for many years.
- Mr. Gaspar will speak more to revenue mobilization in the next session.
International Taxation
- Importance emphasized: international taxation is a key issue on the conference agenda.
- Policy development cited:
- Countries are trying to create a system fit-for-purpose for highly-digitalized 21st century economies.
- The Two Pillar Solution agreed in October 2021 is described as historic.
- IMF position:
- The IMF supports the Two Pillar Solution.
- Multilateral approach rationale: the only way to ensure that highly profitable, multinational firms pay both sufficient tax and pay it to countries where they have significant engagement, including in emerging market and developing countries.
Conclusion
- Regional diversity: appropriate policies will vary across the region.
- Emphasis on revenue mobilization:
- Many countries need to increase domestic revenue mobilization.
- The role of tax policy formulation and administration is growing more important.
- Event purpose: platform for tax officials in the Asian region to share experiences and deepen collaboration on common challenges.
- Closing: wishes for a productive conference.
Opening Remarks by the Deputy Managing Director Kenji Okamura, Tokyo, Japan — October 25, 2022.