IMF estimates UK debt will reach 103% of GDP
The International Monetary Fund (IMF) has spoken out in favour of wealth taxes, income tax surcharges and solidarity business levies which it says should be paid to support those most impacted by the pandemic, in addition to solving the issue of ever-growing public debt.
The body is encouraging developed countries, such as the UK, to implement temporary tax rises as a way of supporting vulnerable households and demographics.
The US-based organisation has made the case that the global pandemic has “exacerbated pre-existing inequalities in incomes and access to basic services”, as well as posing a threat to low-skilled workers who are left out as economies become more digitised.
The IMF also called on policy makers to think about raising property or inheritance taxes alongside wealth taxes as a way to reform “domestic and international tax systems to promote greater fairness and protect the environment”.
The IMF has forecasted UK national debt to rise to 103% of GDP, which would be an increase of over 20% since 2019.
Commenting on the IMF’s proposed ‘solidarity’ tax on high earners and companies that prospered during the coronavirus crisis, Adam Dunnett, Director at ZEDRA, said:
“A short term solidarity tax is a bold idea and in many ways the spirit of the IMF’s statement, the intentions and motivations behind it are hard to fault. The difficulty comes in the details. Who would be asked to pay the tax and on what amount? The main target for this sort of taxation is, of course, the US based ‘FAANG’ companies who are already being targeted outside the US through various digital service tax proposals and laws.”
“A solidarity tax charge on those businesses would probably be popular globally but faces two obstacles; the US administration is likely to have objections and will repeat some of the arguments it has used in response to digital services taxation. The second obstacle is a practical one – taxes on these types of popular consumer businesses are often passed on to the customer pretty quickly. There is a chance that a one time tax charge on these sorts of businesses could end up being paid by the people it is intended to benefit,” Dunnett added.