MOUNTING DEBT IN WORLD’S LARGEST ECONOMIES
NC Monitoring Desk
WASHINGTON: The International Monetary Fund has said that higher tax rates for the rich would help reduce inequality without having a severe impact on economic growth, reported The Independent. “Debt levels are increasing in G20 economies,” Tobias Adrian, who heads the IMF’s monetary and capital markets division, said yesterday. The influential organisation, which is based in Washington DC, has published its biannual fiscal monitor to voice its support for the policies of left-wing politicians such as Labour leader Jeremy Corbyn, who has called for high earners to pay more into the public purse. Countries around the world are suffering the consequences of rising internal inequality and the IMF said tax theory suggested the top one per cent of earners should be paying “significantly” more. It highlighted that although inequality between countries has fallen in recent decades due to the economic success of countries such as China and India, internal inequality in places like the US and the UK has risen sharply. The IMF warned that excessive inequality could lower economic growth as well as polarise politics. Its report said: “Progressive taxation and transfers are key components of efficient fiscal redistribution. “Optimal tax theory suggests significantly higher marginal tax rates on top income earners than current rates.” The IMF’s message would appear to put it at odds with the Trump administration, whose new tax proposals rely heavily on cuts for companies and the wealthy. The IMF noted that top personal income tax rates in Organisation for Economic Co-operation and Development (OECD) rich nations had fallen to 35 per cent in 2015 from an average of 62 per cent in 1981. The IMF, along with the World Bank, will hold its semi-annual meeting of global policymakers later this week.