Tax the rich and better target the multinationals: The IMF has set off shockwaves this week in Washington by suggesting countries fight budget deficits by raising taxes.
Tucked inside a report on public debt, the new tack was mostly eclipsed by worries about the US budget crisis, but did not escape the notice of experts and nongovernmental organizations (NGOs).
“We had to read it twice to be sure we had really understood it,” said Nicolas Mombrial, the head of Oxfam in Washington. “It’s rare that IMF proposals are so surprising.”
Guardian of financial orthodoxy, the International Monetary Fund, which is holding its annual meetings with the World Bank this week in the US capital, typically calls for nations in difficulty to slash public spending to reduce their deficits.
But in its Fiscal Monitor report, subtitled “Taxing Times”, the Fund advanced the idea of taxing the highest-income people and their assets to reinforce the legitimacy of spending cuts and fight against growing income inequalities.
“Scope seems to exist in many advanced economies to raise more revenue from the top of the income distribution,” the IMF wrote, noting “steep cuts” in top rates since the early 1980s.
According to IMF estimates, taxing the rich even at the same rates during the 1980s would reap fiscal revenues equal to 0.25 percent of economic output in the developed countries.
“The gain could in some cases, such as that of the United States, be more significant,” around 1.5 percent of gross domestic product, said the IMF report, which also singled out deficient taxation of multinational companies. see more