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Global economy faces rising risks from tax competition: IMF
Published : Tuesday, 6 October, 2026 at 5:32 PM
Observer Online Report
Growing competition among countries to cut corporate taxes is increasing risks to the global economy, as multinational companies shift profits and investments across borders to reduce their tax liabilities, the International Monetary Fund (IMF) has warned.
The warning was made in a chapter titled “Intangible Yet Real: Spillovers from Corporate Income Taxation,” published as part of the IMF’s October 2026 World Economic Outlook. The report examines how corporate income tax policies create cross-border economic spillovers through profit shifting, investment reallocation and the transfer of knowledge.
According to the IMF, tax competition remains an important feature of the global economy, although its nature has changed over time. The globalisation of production, expansion of multinational companies and growing importance of intangible assets such as intellectual property, technology and brands have transformed corporate income tax systems.
The IMF said multinational companies currently account for more than 20% of global GDP and around 15% of total corporate profits worldwide.
The research found that differences in corporate income tax rates encourage multinational companies to shift profits and investment from one country to another to reduce their tax burden, creating spillover effects on economies beyond the countries directly involved.
The IMF also warned that debt-financed tax cuts could push up global interest rates and crowd out investment in other countries.
According to the researchers, stronger measures against tax evasion and avoidance could help protect government revenues while supporting economic output.
The IMF research further found that a 1-percentage-point increase in a country's corporate income tax rate relative to other countries could reduce foreign direct investment inflows by up to around 0.5% of GDP within three years.
-MT
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Published by the Editor on behalf of the Observer Ltd. from Globe Printers, 24/A, New Eskaton Road, Ramna, Dhaka.
Editorial, News and Commercial Offices : Aziz Bhaban (2nd floor), 93, Motijheel C/A, Dhaka-1000.
Phone: PABX- 41053001-06; Advertisement: 41053012; 01793317829, 01550707291, E-mail: [email protected], [email protected] Online: email: [email protected] 41053014; 01550707297 Advertisement: 01550707296
