Tax Policy and Inclusive Growth

IMF Working Papers, December 4, 2020

Source details

Discusses the theory and practice of tax design to achieve an efficient and equitable outcome, i.e. in support of inclusive growth.
Starts with a discussion of the key principles from tax theory to guide practical tax design.
Elaborates on more granular tax policy, discussing key choices in:
- the structure of the personal income tax on labor and capital income,
- taxes on wealth,
- the corporate income tax,
- and consumption taxes.
Concludes by highlighting the political economy considerations of the issues with concrete recommedtions as to how to implement tax reform.

Key principles from tax theory are presented as guidance for practical tax design.
Granular policy analysis covers:
- personal income tax structure for labor and capital income,
- taxes on wealth,
- corporate income tax design,
- consumption taxes.
Political economy considerations are emphasized in the implementation of tax reform.

Tax design should balance efficiency and equity to support inclusive growth.
Practical design choices span both income and consumption tax instruments as well as wealth and corporate taxation.
Implementation requires attention to political economy factors and concrete recommedtions for reform execution.