Leveraging Anti-money Laundering Measures to Improve Tax Compliance and Help Mobilize Domestic Revenues

IMF Working Papers, April 21, 2023

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The paper advocates leveraging anti-money laundering (AML) measures to enhance tax compliance, tackle tax crimes, and help mobilize domestic revenues.
AML measures have been deployed to improve tax compliance in past episodes, including during the European debt crisis, but their full potential for strengthening tax system integrity has not been fully realized.
Recent data leaks have provided ample evidence of the closely intertwined nature of tax crimes and money laundering, renewing public and policy interest in AML measures for tax purposes.
Political momentum for greater utilization of AML measures may exist given post-pandemic calls for a more progressive tax system, elevated sovereign debt burdens, a challenging global economic outlook, and a widespread cost-of-living crisis.
The IMF stresses the importance of rebuilding fiscal buffers, noting that countries with more fiscal room are better placed to weather the economic slowdown and protect households and businesses.

AML measures can be leveraged to:
- enhance tax compliance;
- tackle tax crimes; and
- mobilize domestic revenues.
Historical precedent: AML tools were used to support tax compliance efforts during the European debt crisis.
Recent evidence from data leaks highlights the close link between tax crimes and money laundering, suggesting AML measures are relevant and potentially effective for tax policy objectives.
Current economic and fiscal context that strengthens the case for AML measures:
- post-pandemic calls for a more progressive tax system;
- elevated sovereign debt burdens;
- a challenging global economic outlook;
- widespread cost-of-living crisis.
Fiscal policy implication emphasized by the IMF:
- rebuilding fiscal buffers is important because countries with more fiscal room are better positioned to respond to economic slowdown and protect households and businesses.

Leverage existing AML frameworks and tools to:
- detect and deter tax crimes;
- strengthen tax compliance mechanisms; and
- support efforts to mobilize domestic revenues.
Use the current political and fiscal environment to pursue greater utilization of AML measures for tax purposes, informed by evidence from recent data leaks and prior experience.
Prioritize actions that contribute to rebuilding fiscal buffers to enhance resilience to economic shocks and protect vulnerable households and businesses.