## Chapter 1: Taxing Better to Boost Growth

_Fiscal Monitor_

## Source details

**Canonical URL:** [Chapter 1: Taxing Better to Boost Growth](https://www.imf.org/en/publications/fm/issues/2026/10/05/fiscal-monitor-october-2026)

## Other formats

- [Markdown version](/en/publications/fm/issues/2026/10/05/fiscal-monitor-october-2026/index.md)
- [Structured JSON version](/en/publications/fm/issues/2026/10/05/fiscal-monitor-october-2026/index.json)
- [Bundle manifest](/en/publications/fm/issues/2026/10/05/fiscal-monitor-october-2026/bundle-manifest.json)

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### Executive summary
- The Fiscal Monitor recommends that taxing better can support growth without sacrificing revenue.
- The chapter shows how reducing tax distortions—through more neutral VAT and corporate tax design, stronger work incentives, better-targeted innovation support, and stronger tax administration—can raise investment, employment, productivity, and economic efficiency.
- It quantifies sizable gains from restoring VAT neutrality, improving the tax treatment of investment costs, strengthening work incentives, and targeting innovation support more effectively.
- The chapter highlights how modern tax administration and clear legal frameworks can lower compliance costs, enhance firm productivity, and help ensure that well-designed reforms deliver in practice.
- Executive Summary (in Thai) and Online Annexes are available as part of the chapter materials.
- Foreword accompanies the chapter.

### Key findings and mechanisms
- Reducing tax-induced distortions supports production, investment, innovation, and employment while preserving overall revenue.
- Restoring VAT neutrality is identified as a major channel to raise economic efficiency.
- Improving corporate tax design and the tax treatment of investment costs can increase investment and productivity.
- Strengthening work incentives is linked to higher employment outcomes.
- Better-targeted innovation support enhances the effectiveness of public support for innovation.
- Modern tax administration and clear legal frameworks reduce compliance costs and enhance firm productivity, improving the likelihood that reforms deliver intended outcomes.

### Policy recommendations
- Adopt more neutral VAT design to restore neutrality and raise efficiency.
- Reform corporate taxation to improve the tax treatment of investment costs.
- Strengthen policies that improve work incentives to support employment.
- Target innovation support more effectively to boost productivity gains from innovation.
- Invest in modern tax administration and establish clear legal frameworks to lower compliance costs and ensure effective implementation of tax reforms.

### Event details
- Public discussion: "Taxing better to boost growth: Insights from the IMF’s Fiscal Monitor"
- Date and time of the event: MONDAY, OCTOBER 5 @ 2:00 - 4:00 PM ET
- Participants:
  - Welcome and introduction: David Wessel, Director - The Hutchins Center on Fiscal and Monetary Policy, Senior Fellow - Economic Studies
  - Presentation of the Fiscal Monitor chapter: Shafik Hebous, Deputy Division Chief, Fiscal Affairs Department - International Monetary Fund
  - Panel discussion: Laura Alfaro; Michael Best; Elena Patel; Rodrigo Valdés
  - Moderator: Victoria Perry
  - Closing remarks

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## Content in this bundle

- **Online Annexes**
  - [Online Annexes (Markdown version)](/-/media/files/publications/fiscal-monitor/2026/october/english/ch1.pdf.md){rel="alternate" type="text/markdown"}
  - [Online Annexes (PDF)](/-/media/files/publications/fiscal-monitor/2026/october/english/ch1.pdf){rel="external" type="application/pdf"}
- **Read the Chapter**
  - [Read the Chapter (Markdown version)](/-/media/files/publications/fiscal-monitor/2026/october/english/ch1onlineannex.pdf.md){rel="alternate" type="text/markdown"}
  - [Read the Chapter (PDF)](/-/media/files/publications/fiscal-monitor/2026/october/english/ch1onlineannex.pdf){rel="external" type="application/pdf"}
- **Executive Summary**
  - [Executive Summary (Markdown version)](/-/media/files/publications/fiscal-monitor/2026/october/english/execsum.pdf.md){rel="alternate" type="text/markdown"}
  - [Executive Summary (PDF)](/-/media/files/publications/fiscal-monitor/2026/october/english/execsum.pdf){rel="external" type="application/pdf"}
- **Foreword. IMF Fiscal Monitor, October 2026. Taxing to Better Boost Growth**
  - [Foreword. IMF Fiscal Monitor, October 2026. Taxing to Better Boost Growth (Markdown version)](/-/media/files/publications/fiscal-monitor/2026/october/english/foreword.pdf.md){rel="alternate" type="text/markdown"}
  - [Foreword. IMF Fiscal Monitor, October 2026. Taxing to Better Boost Growth (PDF)](/-/media/files/publications/fiscal-monitor/2026/october/english/foreword.pdf){rel="external" type="application/pdf"}
- **Executive Summary**
  - [Executive Summary (Markdown version)](/-/media/files/publications/fiscal-monitor/2026/october/thai/execsum.pdf.md){rel="alternate" type="text/markdown"}
  - [Executive Summary (PDF)](/-/media/files/publications/fiscal-monitor/2026/october/thai/execsum.pdf){rel="external" type="application/pdf"}

---

## References

- [Previous Fiscal Monitor Reports](https://www.imf.org/en/publications/fm)

_Source: https://www.imf.org/en/publications/fm/issues/2026/10/05/fiscal-monitor-october-2026_