Higher taxes needed to tackle the climate crisis, warns IMF 

Pandemic pressure means countries might have to hike taxes to tackle the climate crisis, warns the IMF

The pandemic has made it much harder for governments to meet their green goals, the International Monetary Fund has warned.

Countries may have to hike taxes to pay for environmentally friendly policies, it said.

The IMF’s comments came just weeks before the UK hosts the United Nations Cop26 climate change conference, which Britain is touting as a landmark moment in the fight against global warming.

Green taxes: The International Monetary Fund has warned that countries may have to hike taxes to pay for environmentally friendly policies such as renewable energy schemes

The levels of public debt around the world – which now amount to £65 trillion – will make it harder for cash-strapped countries to justify investing in environmentally friendly projects, according to the IMF’s latest Fiscal Monitor released yesterday.

Just this week, China announced plans to build more coal-fired power plants.

The IMF is adamant that building a green economy will be vital to future prosperity.

But it said: ‘The stark difference across countries in the projected scarring from the pandemic is likely to affect income inequality and poverty, making it more difficult for countries to achieve their Sustainable Development Goals.’

It explained that getting closer to these ‘will require significantly scaling up spending’ on skills, education, transport, offices and machinery.

To muster the resources, the IMF said, countries would have to reverse the decline in their tax receipts which is expected to follow from the pandemic.

‘This can be achieved through a well designed menu of value-added and property taxes, progressive income, corporate and capital taxation, and expansion of the base for corporate and personal income taxes,’ it said.

Britain is currently lumbered with a £2 trillion debt pile, following a year of spending on the pandemic. 

The IMF’s Fiscal Monitor predicted that the UK’s net debt, as a proportion of its economy, will steadily climb from a predicted level of 97.2 per cent this year to 99.9 per cent in 2026.

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