Governments should consider raising taxes on society's wealthiest to tackle inequality, according to the head of the International Monetary Fund (IMF).
In a blog post on Tuesday, Kristalina Georgieva, managing director of the IMF, said inequality had become “one of the most complex and vexing challenges in the global economy” over the last decade.
However, she was optimistic that policymakers had the power to deliver real change, despite the political difficulty of implementing reforms.
Firstly, Georgieva suggested governments needed to rethink their policies and consider progressive taxation.
“Progressive taxation is a key component of effective fiscal policy,” she said. “At the top of the income distribution, our research shows that marginal tax rates can be raised without sacrificing economic growth.”
The IMF has long advocated progressive tax policies, naming it one of three key methods for tackling inequality in 2017.
Another way policymakers could address inequality was through “gender budgeting,” Georgieva said.
Gender budgeting is a strategy to achieve equality between women and men by focusing on how public resources are collected and spent, according to the EU. It can be applied at either central or local government level and may include steps such as restructuring budgets and policies or increasing female participation in the budget process.
“While many countries recognize the need for gender equality and women's empowerment, governments can use gender budgeting to structure spending and taxation in ways to advance gender equality even further — increasing women's participation in the workforce and, in turn, boosting growth and stability,” Georgieva said in her blog.
She also suggested that social spending policies had a part to play, noting that allocating funds to areas such as education, health care and pensions could help to reduce wealth inequality.