Yahoo Finance Raise capital gains tax to cover higher benefit bills, says IMF
Britain and other rich nations should raise taxes on capital gains to support a surge in benefits spending, the International Monetary Fund (IMF) has said.
In a report released on Monday, the IMF urged governments to tax businesses and investors more in anticipation of welfare bills rising across the world.
It said higher capital gains taxes should be used to support workers as artificial intelligence was increasingly being used to replace jobs.
The IMF’s proposal comes amid a debate over capital gains tax in the UK, as the Conservatives have accused Labour of plotting a raid on companies and investors.
Sir Keir Starmer has ruled out increasing the levy on the sale of family homes, though not on other assets.
The Opposition has insisted its policies will not require further tax rises beyond those set out in its manifesto, which included a raid on private schools.
Ruud De Mooij, a senior tax official at the IMF, said it was time to revisit the idea of higher wealth taxes in a bid to boost equality.
He said: “The effective tax burden on capital has consistently declined and is now significantly below the tax burden on labour. That shift runs the risk of eroding the overall tax base. More efficiently taxing capital income can restore that.
“Inequality may increase as a result of AI. Capital income is highly concentrated among the rich. Inequality is another reason to focus on more strengthening of capital income taxes.”
He said the introduction of global minimum tax rates would “allow countries to more effectively tax corporations”, and added that data-sharing deals would make it easier to tax individuals on their global earnings.
‘Stronger taxes on capital gains’
The IMF report said “a supplemental tax on excess profits, stronger taxes on capital gains, and improved enforcement” should all be considered.
The institution said the money raised by higher taxes would be needed to cover higher benefit bills.
“Most countries have scope to broaden the coverage and generosity of unemployment insurance,” the IMF said.
“By offering financial support during unemployment, promoting new skills acquisition, and creating a safety net, social protection systems can help individuals adapt to job market changes.”
