IMF suggests levying temporary tax on companies with high profits in the pandemic

The IMF (International Monetary Fund) has suggested to countries facing problems of lack of public resources that they consider raising rates on companies that have had above-average profits amid the pandemic.

“To ease the burden on public finances, temporary increases in taxes on excessive profits could be considered. This would help to capture back some of the transfers [de recursos públicos] to companies that didn’t need them”, the fund points out, in a chapter of its report on global prospects, published this week. The document, however, does not detail how this taxation could be done in practice.

The IMF points out that many governments gave economic aid during the pandemic, such as tax cuts, which helped companies and families to have less difficulties. However, this has led to an increase in the indebtedness of governments, which now have less room to maneuver to continue providing support in areas that still need help.

In Brazil, for example, the federal public debt should reach R$ 6.4 trillion this year, according to the National Treasury forecast. It closed 2021 at R$ 5.6 trillion.

The fund holds its Spring Meetings in Washington this week. In several documents and events, directors of the institution recommended that countries look for ways to help the poorest people gain access to food and fuel, through actions such as direct subsidies. However, they considered that these actions must be calibrated in order to really help those who need it, for a determined time, so as not to generate fiscal problems in the future.

High interest rates, adopted by central banks to contain inflation, can also worsen government indebtedness, generating even more need to raise funds.

Thus, taxation of companies that had significant increases in earnings during the pandemic could generate more cash to support the vulnerable and also companies and sectors that have been hard hit.

In recent years, technology companies have made great gains due to the increased use of digital tools as an option to work, study and have fun during periods of social isolation. Alphabet, which owns Google, had a profit of US$ 76 billion in 2021, 89% more than the one obtained in 2020, for example.

On the other hand, sectors that depended on face-to-face contact, such as high street commerce and tourism, had large losses.

The IMF had already defended the taxation of unusual profits other times in recent years, considering that several companies ended up benefiting from the aid created in the midst of the pandemic, directly or indirectly, without, in fact, needing them.

This week, the fund also released its economic forecasts. Compared to the January report, the entity reduced its expectation of growth in the global economy, from 4.4% to 3.6% in 2022. Brazil is expected to grow 0.8% this year, the study projects.