Unrecovered VAT can push input cost up by 8.9pc: IMF study
ISLAMABAD: The International Monetary Fund (IMF) has highlighted significant distortions in tax systems that affect key economic decisions, noting that unrecovered value-added tax (VAT) can raise input costs by up to 8.9 percent. In comparison, corporate taxation can increase the cost of capital by 15-19 percent. Shafik Hebous, deputy division chief in the IMF’s fiscal affairs department,…
The International Monetary Fund (IMF) has identified significant distortions in tax systems that can impact key economic choices. One such distortion is unrecovered value-added tax (VAT), which can increase input costs by up to 8.9 percent. Corporate taxation, on the other hand, can raise the cost of capital by a more substantial 15-19 percent.
Shafik Hebous, a deputy division chief at the IMF, presented these findings during a discussion hosted by the IMF and the Urban-Brookings Tax Policy Center. These tax distortions influence crucial economic decisions, particularly those related to investment, production, and employment.
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