The IMF supports US tax reform in principle, but is looking for details on the new proposal backed by the Trump Administration before passing judgement on its impact spokesman Bill Murray told reporters in Washington Thursday (September 28).
“Our general principle is tax reform is definitely needed in the United States. We're heartened that that is underway. Now we have to look at the details,” said Murray.
In a recent working paper the IMF found that, depending on how a tax cut is targeted, it is possible to make some progress toward the first two objectives. Personal income tax cuts can help support growth and, if well targeted, can also help improve income distribution.
However, the paper also found that lowering personal income tax rates does not raise growth enough to offset the revenue loss that is caused by the tax cut itself.
“Supporting low and middle income households and promoting investments in human and physical capital formation would feed back into better growth and lead to more broad-based improvements in living standards over the medium term,” said Murray.
A blog outlined the findings here: https://blogs.imf.org/2017/09/01/the-benefits-and-costs-of-a-u-s-tax-cut/
The IMF also sees no immediate financial stability concerns in the Greek banking system, Murray said.
But there needs to be a strategy to deal with Greece’s exceptionally high level of nonperforming loans over the medium term as outlined by Poul Thomsen, Director of the European Department during a speech in London earlier Thursday.
“We think that that this is a constructive proposal, that's what Poul underscored earlier today, a constructive proposal that achieves the same broad objectives,” said Murray. “And we are discussing the exact modalities with our colleagues in the ECB regarding dealing with nonperforming loans over the medium term.”
And Murray reiterated the need for pension reform in Ukraine.
“We urge the authorities and the Parliament to ensure that the adopted pension law achieves the objection of the reform which has been worked out in liaison with the IMF and the World Bank,” said Murray.
“We stand ready to further cooperate closely with the authorities on any possible revisions the draft pension law may require in order to meet the objections of the reform.”