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Tax Reform 'Long Overdue' In US, IMF Says

by Mike Godfrey, Tax-News.com, Washington

10 July 2015


Complexity and loopholes in the United States tax system have increased over the years, undermining revenues and damaging productivity, the International Monetary Fund (IMF) said.

The Fund said in its 2015 Article IV Consultation for the country that a reform of the tax code is "long overdue." It said that changes should focus on simplifying the system and broadening the tax base by capping or eliminating personal income tax deductions; removing tax preferences, exclusions, and deductions from the business tax; and changing the tax treatment for multinationals to limit base erosion and profit shifting.

In addition to improving the structure of the system, there is a need to raise revenues, which could be achieved through a broad-based carbon tax, a higher federal gas tax, and the introduction of a federal-level value-added tax (VAT), the report said. A carbon tax of around USD45 per ton of CO2, phased in gradually, would raise revenue of around USD170bn (0.9 percent of gross domestic product) once fully implemented, it said.

These measures would provide near-term fiscal space to finance measures that support growth, job creation, and productivity, according to the report.

The federal Government deficit was USD483bn in the 2014 fiscal year (2.8 percent of GDP). Income tax receipts are currently above budget forecasts, the IMF said.

TAGS: compliance | tax | economics | business | value added tax (VAT) | tax compliance | mining | fiscal policy | budget | International Monetary Fund (IMF) | multinationals | carbon tax | United States | tax reform

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