IMF Report Urges Chancellor To Check Fiscal Debt
By by Jason Gorringe, Tax-News.com, London
22 December 2003

Despite an “enviable” economic track record in recent years, the United Kingdom must now begin to rein-in its growing fiscal deficit either through spending cuts or taxation measures, the International Monetary Fund said in its annual report on the UK economy last week.

Observing that a gradual decline in the deficit is now “appropriate”, the IMF stated: “Our preferred mode for achieving fiscal adjustment is by moderating the growth of spending in areas where current plans involve sharp increases in the immediate future.”

However, the report also suggested adjustments in taxation to boost revenues, saying the IMF would prefer to see a broadening of the tax base rather than increases in the rates of tax. Whilst the IMF did not offer any specific recommendations, this could mean a widening of the VAT net to cover currently zero-rated items.

The IMF also recommended a “wider application of user fees” to fund public services such as levies on the use of the health service, additional road charging and university fees.

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