Trump under fire at IMF
THE International Monetary Fund has long been regarded as a capitalist tool imposing unfriendly orthodoxy on borrowing countries. In Latin America and other parts of the world, arriving IMF staff often are greeted with demonstrations amid concerns of tough cuts in public spending.
Post- crisis political changes in the West have led to some serious rethinking about policy. Brexit, the rise of Donald Trump, the emergence of Macron, the success of the right-wing AfG in the German elections, the Catalan uprising and much else are partly a response to what its chief economist Maurice Obstfeld refers to as ‘wealth inequalities’.
The IMF has a solution which flies in the face of tax policies fashionable since the 1980s when supply- side economists embraced lower tax bands as means of unleashing growth.
The central tenet of its latest Fiscal Monitor is that ‘progressive’ taxation – the wealthier you are the more you pay – is good and can unleash prosperity. It wants more income tax and taxes on wealth in the advanced countries and more indirect taxes, such as duties in carbon fuels, in the less well-off states.
The fund rejects tax extremism of the kind seen in Britain in the 1970s. It also thinks it is time to remove from tax codes the privileges granted to the better- off. These include deductions for all manner of things ranging from mortgage interest (not relevant to the UK) to some medical costs.
The fund also thinks it is time to raise capital gains taxes to meaningful levels so they redistribute wealth, not allowing it to accumulate with individuals and families.
Much of this is almost certainly aimed at the Trump tax reforms which critics argue will increase inequalities in the US.
The timing of the IMF’s release is embar- rassing for its biggest shareholder, the US, in that it coincided with a Trump speech in Pennsylvania designed to win support for personal and corporate tax reforms.
Radical changes in the thinking at the IMF will be seen as manna from heaven from an unexpected source for Jeremy Corbyn and John McDonnell. The Labour opposition is determined to tax the rich until the pips squeak.
Experience in Europe shows raising income taxes to exceptional levels can have hugely negative effects. Former president Francois Hollande’s assault on the rich in France sent professionals and the wealthy scurrying to London and other locations.
When George Osborne lowered the highest rate of tax from 50pc to 45pc, a Treasury study suggested there was no loss of revenues because tax avoiders rejoined the system and the higher paid had an incentive to take more of their earnings in the UK.
The IMF is in the firing line of conservatives with its progressive tax campaign. Big shareholders in Washington and London – at the core of free market Anglo-Saxon capitalism – are unlikely to be impressed.
Cyber threat
SOME 400,000 British consumers on the Equifax credit data base need no reminding of the danger of cyber attacks. There is still much which is unknown about the data leaks from even bigger attacks on Yahoo.
In its global stability report the IMF weighs in, noting that the assaults on financial institutions can be motivated by profit or the simple destruction of carefully built IT systems.
The economic loss from a major incident could be as high as $53bn (£40.1bn), the IMF says.
The fund worries that the impact on the stability of the whole financial system could be ‘substantial’ because of the high reliance on technology.
The solutions? More global co-operation in tracking the sources and risks, increased resilience and focus on prevention, and more information sharing.
I have an alternative: a return to old fashioned branch banking.
Yoghurt pioneer
BREAKFAST in Washington includes Chobani ‘Greek’ yoghurt. Founder Hamdi Ulukaya was the star guest here at a forum hosted by World Bank president Jim Kim.
He is embraced by the development lobby for creating a $1bn (£760m) turnover enterprise by using refugee labour and handing out equity to employees.
The sooner Ulukaya comes to Britain, the better.