IMF: Anti-tax avoidance reforms could deliver bigger gains for emerging economies

The International Monetary Fund (IMF) has said stronger anti-tax avoidance measures could deliver significant gains for emerging market and developing economies by reducing profit shifting and protecting government revenue.

The finding was contained in an analytical chapter of the IMF’s October 2026 World Economic Outlook, which examined how changes in international tax rules are reshaping competition for multinational investment and profits.

The IMF said the growing importance of intangible assets such as data, patents, software and trademarks has made it easier for multinational companies to separate where they report profits from where they conduct business, but stronger anti-avoidance rules are beginning to change that pattern.

IMF sees shift in global tax competition

The IMF said technological change and the growing use of intangible assets have expanded opportunities for multinational companies to move reported profits to jurisdictions with lower tax rates, while governments have competed for those profits through lower taxes and incentives.

However, the Fund said international anti-avoidance reforms are increasingly linking reported profits to the locations where companies make real investments.

• “These assets make it easier for multinational corporations to separate where they report profits from where they do business, shifting them to places where they pay lower taxes.”
• “As anti-avoidance measures become more widespread, multinationals appear more likely to report profits where they invest,” the IMF said.
• “Tax competition has not disappeared, but its character appears to be changing.”

The IMF said competition between countries over headline corporate tax rates has moderated since the mid-2010s, coinciding with stronger rules designed to limit tax-base erosion and profit shifting.

Its findings indicate that reported profits have become less responsive to differences in tax rates, while real investment has become more sensitive, suggesting a closer connection between where multinational companies invest and where they report profits.

Tax reforms could protect emerging economies

The IMF said changes in corporate tax rates can have significant cross-border effects, with tax cuts potentially attracting investment but also reducing government revenue and creating spillovers for other economies.

The Fund found that a one percentage-point increase in a country’s corporate income tax rate relative to other countries is associated with a cumulative decline in foreign direct investment inflows equivalent to about 0.5% of GDP over three years.

• “Corporate income tax cuts in major economies are followed by reduced economic output in the rest of the world,” the IMF said.
• “When a country’s corporate income tax rate increases by 1 percentage point relative to other countries, foreign direct investment inflows decline cumulatively by about 0.5 percent of GDP over three years.”
• “Tax competition, in other words, redistributes the gains from a tax cut.”
• The IMF said the consequences also depend on how tax cuts are financed. Borrowing to fund reductions can push up real interest rates and limit investment gains, while spending cuts or higher taxes elsewhere can reduce resources available for public investment.

The Fund said anti-avoidance measures can help countries preserve fiscal space and generate particularly large gains for emerging market and developing economies, which tend to rely more heavily on corporate income tax revenue to fund infrastructure, education, health and other growth-supporting investments.

Nigeria faces tax revenue challenge

The IMF’s findings are particularly relevant to Nigeria, where concerns over tax compliance and revenue mobilisation have remained part of the broader tax reform debate.

Nairametrics previously reported that at least 99% of Nigeria’s wealthiest individuals were allegedly evading their tax obligations, citing an Oxfam International report titled “Taxing the Rich: Nigerian Fair Tax Monitor Thematic Report.”

Nigeria’s Tax Ombud has also warned against focusing tax reforms primarily on revenue collection without strengthening taxpayer confidence in the system.

• Dr. John Nwabueze, Nigeria’s first Tax Ombudsman, warned that pursuing collection targets without building taxpayer trust could undermine the sustainability of tax reforms.
• The warning was contained in a speech delivered on his behalf by his Chief of Staff, Dr. Peter Iwegbu, at the 36th anniversary conference of the Finance Correspondents Association of Nigeria (FICAN) in Lagos.
• The Tax Ombud’s position highlights the need to balance revenue mobilisation with taxpayer confidence and a sustainable tax system.

The IMF said that as technological change continues to make capital more mobile, corporate tax systems are likely to place greater emphasis on attracting genuine investment as the link between reported profits and economic activity becomes stronger.