IMF chief warns AI could erode global tax bases

The managing director of the International Monetary Fund has cautioned financial ministers that the widespread adoption of artificial intelligence poses a significant risk to global tax revenues. Kristalina Georgieva stated that governments may be ill-prepared for a potential decline in income derived from the labour market as the technology reshapes employment structures. Speaking at the fund’s summit in Bangkok, she described the technological shift as a slow-moving tsunami that could impact sixty per cent of jobs in wealthy nations. Her remarks highlight a growing concern among policymakers that the current fiscal frameworks are not robust enough to withstand such structural changes.

Georgieva suggested in a recent blog post that governments must make difficult choices and implement substantial tax reforms. She argued that revenue streams need to shift away from labour towards other areas, such as land or investment. The IMF head noted that while artificial intelligence may boost economic growth, it simultaneously carries the potential to reduce labour income, widen inequality, and erode the tax base. She emphasised that countries will require sufficient fiscal space to invest in infrastructure and skills, as well as to cushion the impact on the most vulnerable populations. With public debt already high, she warned that policymakers face the challenge of designing tax systems that are fit for the artificial intelligence era.

In the United Kingdom, the reliance on labour-related taxes is pronounced. Income taxes account for more than a quarter of total tax receipts, while National Insurance contributions from workers and employers represent approximately sixteen per cent of total receipts for the 2025-26 period. Additionally, revenue is heavily concentrated among the highest earners, with the top one per cent of the population paying about twenty-eight and a half per cent of all tax. In response to these dynamics, former Chancellor Rachel Reeves announced the launch of the UK’s AI Economics Institute. Led by Nobel prize winner Professor Simon Johnson, the body aims to evaluate and manage the fiscal policy effects of the technology.

The debate has attracted input from various economists. Oxford professor Ben Ansell has proposed an AI token tax, which would levy a charge on the use of models. Meanwhile, Anton Korinek, an Austrian-American economist on Anthropic’s economic advisory council, has advocated for a transition from income taxation to consumption taxation. Georgieva also warned of potential financial instability, suggesting that falling stock prices could cascade through the highly leveraged and circular AI ecosystem, spreading losses globally. These concerns echo statements from Financial Stability Board chair Andrew Bailey and Bank of England deputy governor Sarah Breeden, who predicted a market correction if company profits disappoint following years of heavy capital investment.

The warnings come at a time of global economic turbulence, characterised by ongoing conflicts in Ukraine and the Middle East and low growth in Western economies. The IMF has urged European countries to avoid imposing further protectionist measures, particularly after its Made in Europe scheme, designed to boost domestic manufacturers over imports from China, has come under scrutiny. Economists advised European leaders to dismiss rising calls for more interventionist industrial policy, arguing that such measures would not durably address the continent’s underlying growth problems. Given large deficits in various major economies, ministers were also urged to ensure that energy support packages remain tightly targeted at supporting the most vulnerable.