Danny McCance 18 Sep 2018 02:59pm

IMF proposes post-Brexit tax reform

Tax reform could help “reduce economic distortions” likely to be felt following the UK’s withdrawal from the EU

In its annual analysis of the UK economy, the International Monetary Fund (IMF) said scaling back VAT would helped to increase “tax neutrality.”

“Better aligning the tax treatment of employees and the self-employed would improve fairness and bring the tax system in line with evolving employment practices,” it said.

The IMF also proposed “reducing the tax code’s bias towards debt,” suggesting for example “a tax allowance for corporate equity.”

At the press conference to present the IMF’s findings its managing director Christine Lagarde predicted that a no-deal Brexit will impose “very large costs on the UK economy.”

Lagarde said, “Leaving the EU without an agreement on the framework for the future economic relationship and an implementation period to get there is the most significant near-term risk to the UK economy.”

The IMF forecasts GDP growth of 1.5% in the UK for 2018/19, a 0.25% decrease from the previous two years, due to Brexit-related factors.

At the press conference, chancellor Philip Hammond said that the Treasury has already “cut taxes for over 30 million people.”

“Our economic plan has delivered growth in the economy, growth in employment, and growth in wages,” Hammond said.

He did, however, add that these economic successes should not be taken for granted at the “critical juncture for the UK economy.”

“But we must, of course, continue to prepare for all scenarios. A no-deal scenario remains unlikely – but it is not impossible,” Hammond said.

At the end of August, the chancellor angered the pro-Brexit members of the governemnt by stating that a no-deal Brexit would damage UK GDP for years to come.

Yesterday, the British Chambers of Commerce lowered its forecast for UK growth from 1.3% to 1.1%.