IMF warns AI bubble and tax erosion could destabilise global economy

Summarised from 2 outlets · Updated 15 Oct, 23:20 · Archive

The International Monetary Fund has warned that AI investment volatility and the technology's impact on employment could pose serious risks to the global economy.

The International Monetary Fund has issued multiple warnings about the risks posed by artificial intelligence to the global economy. IMF managing director Kristalina Georgieva warned financial ministers that widespread AI adoption could erode tax bases across the world as incomes are squeezed by the technology. She called AI a 'slow-moving tsunami' that could affect 60 per cent of jobs in wealthy countries.

Georgieva said governments may be ill-prepared for a potential slump in tax revenue brought on by AI's impact on the labour market. She suggested that countries would need to 'make hard choices' and implement vast tax reform to shift revenue streams from labour to other areas such as land or investment. 'AI may raise growth, but it could also reduce labour income, increase inequality, and erode the tax base,' she said.

The IMF also warned that global financial markets are becoming increasingly vulnerable to volatility in AI investments. The fund identified three potential developments that could cause major market disruption: a correction in AI-related investments and company valuations, an increase in government bond yields, or a major cyberattack targeting critical infrastructure. The IMF noted that interconnected tech investments pose particular risks, with companies increasingly reliant on one another, and warned that cybercriminals could exploit the digital and interconnected nature of modern financial systems to attack multiple institutions simultaneously.

How it is being reported

• IMF boss warns on AI ‘tax erosion’ if jobs are wiped outThe head of the International Monetary Fund has warned financial ministers that widespread AI adoption could erode tax bases across the world as incomes are squeezed by the technology. Kristalina Georgieva, the managing director of the IMF, said governments may be ill-prepared for a potential slump in tax revenue brought on by AI’s impact on [...]City AM · 15 Oct, 23:00
• Lack of promised profit could tank the global economy if the AI bubble pops, IMF warnsThe International Monetary Fund is worried that our interdependent world could cause isolated incidents to have widespread effects.TechRadar · 14 Oct, 13:05

In this story: International Monetary Fund · Kristalina Georgieva · Bangkok · United Kingdom

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