Rich countries to up taxes, US needs rethink – OECD

PARIS, Dec 15 (BestGrowthStock) – The United States requires a
“fundamental rethink” of its tax system, and many industrialised
countries will have to raise taxes above pre-crisis levels to
reduce their deficits, the OECD said on Wednesday.
Jeffrey Owens, director of the Organisation of Economic
Co-operation and Development’s tax policy centre, said many of
its 34 member states would seek to increase tax revenues as debt
levels in many countries approached 100 percent of GDP.
“These are figures that we have not seen in peace time,”
Owens told a news conference.

“Any package to solve the current deficit situation in most
countries will require an increase in taxation, and in many it
will require tax increases that go beyond the level prior to the
crisis,” he said.

President Barack Obama’s decision this month to roll over
Bush-era income tax breaks for millions of Americans was a
“political compromise” which should have a stimulative effect on
the economy, Owens added.

But with the third-lowest overall tax level in the OECD,
behind only Mexico and Chile, Owens said the United States
needed radical change in order to reduce its deficit.

The U.S. deficit stood at 8.9 percent of GDP in the last
fiscal year. The federal debt is headed towards nearly $14
trillion.

“Part of that resolution of the deficit will involve a
fundamental rethink of the United States tax system. How can it
be more competitive?” said Owens, noting that the United States
had the highest corporate tax rate in the OECD.

A panel appointed by Obama to study deficit reduction called
for a broad overhaul of the U.S. tax code to lower rates while
eliminating tax breaks for favoured groups. [ID:nN10293996]

Owens said the OECD recommended moves to cut tax rates and
broaden the tax base and in particular was urging its members to
move away from taxes on income and profits, which could result
in economic distortions, towards taxes on consumption and
environmental levies.

Stephen Matthews, the OECD’s chief tax economist, noted the
crisis had resulted in an unprecedented fall in the tax burden
in OECD countries last year of around 1 percentage point of GDP,
returning the tax to GDP ratio to levels last seen in the early
1990s.

In Spain, one of the worst affected countries, the tax
burden had slumped by a colossal 7 percentage points of GDP from
2007-2009, he said.

For France, which has more taxes than any other country in
the OECD, Owens called for a simplification of the tax system
and a reduction in exemptions.
(Reporting by Daniel Flynn)

Rich countries to up taxes, US needs rethink – OECD