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IMF Presses For US Tax Reforms

by Mike Godfrey,, Washington

24 June 2016

The International Monetary Fund has called for comprehensive US tax reform that would reduce statutory income tax rates, make individual tax more progressive, and re-balance the tax code from direct to indirect taxes.

The IMF noted "an urgent need to tackle poverty," which could be helped by "a more generous earned income tax credit (including eligibility for workers without dependents, those under 25, and older workers that are not yet eligible for social security)." The progressivity of income taxation could also be increased by "capping itemized deductions, including for mortgage interest, to lessen the tax benefit for the most well off."

"Reform of the corporate income tax is badly needed and could help revitalize business dynamism and investment," the IMF continued. "In addition to rate reduction and a streamlining of business tax expenditures, tax avoidance opportunities should be reduced by tightening income-stripping rules through limits on interest deductions."

"For outbound investment," it added, "the US corporate tax system should adopt a territorial system but impose a minimum rent tax on the foreign earnings of US corporations. There should also be a mandatory tax on the existing stock of un-repatriated, foreign-sourced earnings (with payment spread over the next several years)."

"Finally," the IMF concluded, "as has been advocated in past consultations, additional revenues should be generated through the introduction of a federal-level value-added tax and a broad-based carbon tax, including an increase in the federal gas tax."

TAGS: individuals | tax | investment | business | value added tax (VAT) | tax avoidance | International Monetary Fund (IMF) | corporation tax | transfer pricing | carbon tax | United States | tax reform | individual income tax | business investment

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