IMF boss warns on AI ‘tax erosion’ if jobs are wiped out

The International Monetary Fund's chief has issued a stark warning to financial ministers about the potential erosion of tax bases worldwide due to the widespread adoption of artificial intelligence (AI). Kristalina Georgieva, the managing director of the IMF, cautioned that AI's impact on the labor market could lead to a significant decrease in tax revenue for governments.

At the organization's summit in Bangkok, Georgieva described AI as a "slow-moving tsunami" that could affect up to 60% of jobs in wealthy nations. She emphasized that governments would need to undertake "hard choices" and implement extensive tax reform to shift revenue sources away from labor and towards other areas like land or investment.

Georgieva stressed that AI may boost economic growth but also has the potential to increase inequality, reduce labor income, and erode the tax base. She highlighted the need for countries to maintain fiscal space for infrastructure and skills development, as well as to establish tax systems suitable for the AI era. The UK is particularly vulnerable, with income taxes comprising more than a quarter of total tax receipts and National Insurance contributions accounting for about 16% of total revenue in 2025-26.

The government has also unveiled the AI Economics Institute, led by Nobel laureate Professor Simon Johnson, to assess and manage the effects of AI on fiscal policy. Some experts propose an "AI token tax" or a transition from income taxation to consumption taxation as potential solutions. However, the IMF cautioned against imposing more protectionist measures, urging European countries to focus on targeted energy support packages for vulnerable populations.