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IMF Recommends Broad Tax Reform For The UK

by Jason Gorringe, Tax-News.com, London

20 February 2018


In its annual report for authorities in the UK, the International Monetary Fund said the country should consider reining in the scope of preferential value-added tax rates, equalizing the tax treatment of employed and self-employed persons, reforming property taxes, and reducing the corporate tax code's bias towards debt.

The report recommended that tax reform efforts should focus on scaling back distortionary tax expenditures, and in particular reduced rates of VAT on some goods, to abate the severity of ongoing austerity. Tax relief from value-added tax is the most significant UK tax expenditure (at 2.6 percent of GDP), with the main contribution from the zero percent VAT rate on most foods (0.9 percent of GDP).

On reducing the tax code's bias towards debt, the IMF recommended adopting a tax allowance for corporate equity. It said also that property tax should be rebalanced away from transactions towards values, to boost labor mobility and encourage more efficient use of the housing stock.

Finally, it said that more equal tax treatment for employees, the self-employed, and corporations would remove incentives for taxpayers to switch to a different legal form for tax reasons.

TAGS: tax | property tax | employees | corporation tax | United Kingdom | food | tax rates | tax reform | individual income tax | Tax

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