IMF tells gov’ts to tax the rich, multinationals

Legal loopholes deprive US of roughly $60B in receipts

WASHINGTON—Tax the rich and better target the multinationals: The IMF has set off shockwaves this week in Washington by suggesting countries fight budget deficits by raising taxes.

Tucked inside a report on public debt, the new tack wasmostly eclipsed by worries about the US budget crisis, but did not escape the notice of experts and nongovernmental organizations (NGOs).

“We had to read it twice to be sure we had really understood it,” said Nicolas Mombrial, head of Oxfam in Washington. “It’s rare that IMF pro- posals are so surprising.”

Considered a guardian of financial orthodoxy, the International Monetary Fund, which is holding its annual meetings with the World Bank this week in the US capital, typically calls for nations in difficulty to slash public spending to reduce their deficits.

But in its Fiscal Monitor report, subtitled “Taxing Times”, the IMF advanced the idea of taxing the highestincome people and their assets to reinforce the legitimacy of spending cuts and fight growing income inequalities.

“Scope seems to exist in many advanced economies to raise more revenue from the top of the income distribution,” the IMF wrote, noting “steep cuts” in top rates since the early 1980s.

According to IMF estimates, taxing the rich, even at the same rates during the 1980s, would reap fiscal revenues equal to 0.25 percent of economic output in the developed countries.

“The gain could in some cases, such as that of the United States, be more significant,” around 1.5 percent of gross domestic product, said the IMF report, which also singled out deficient taxation ofmultinational firms.

In the US alone, legal loopholes deprive the Treasury of roughly $60 billion in receipts, the global lender said.

The 188-nation IMF said it did not want to enter into a debate on whether the rich should pay more taxes.

But, it said: “The chance to review international tax architecture seems to come about once a century; the fundamental issues should not be ducked.”

IMF managing director Christine Lagarde kept up the sales pitch for a more just fiscal policy.

“It’s clearly something finance ministers are interested in, it’s something that is necessary for the right balance of public finances,” said Lagarde, a former French finance minister, in a panel discussion last week.

“There are lot of wasted opportunities,” she added.