27 12 2017

UK Encouraged To Add Tax Hikes To Austerity Drive

The United Kingdom should look to tax measures to bring down the deficit and focus on the self-employed and value-added tax rules, the International Monetary Fund has recommended.

"Over the long term, population aging will put pressure on the public finances, while productivity developments and Brexit-related effects may exacerbate the challenge," said the IMF.

The IMF noted that the UK's austerity efforts have focused on curtailing spending. It said "greater reliance on revenue measures for consolidation than in recent years may be warranted."

The IMF noted that reducing preferential VAT rates for certain goods would increase tax neutrality, and added that the UK should better align the tax treatment of employees and the self-employed to make the tax system fairer and provide more equal treatment for gig economy workers.

Adopting a tax allowance for corporate equity could reduce the tax code's bias towards debt and enhance financial stability, the Fund added, and said the UK should retarget the property tax towards the value of taxpayers' property portfolios rather than transactions, to free up housing.