Raising income taxes on the rich would reduce inequality, says IMF

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Raising income taxes on the rich would reduce inequality without damaging the prospects for growth, according to the IMF’s half-yearly fiscal monitor.

Suggesting wealth taxes should be considered by government, the IMF rejected the argument that raising taxes on the richest one per cent would damage growth.

It said: “Empirical results do not support this argument, at least for levels of progressivity that are not excessive.”

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Labour shadow chancellor John McDonnell said the report proved the need for a more progressive tax system.

He said: “The IMF support the argument we made in the General Election for a fairer tax system. There is no evidence to support those who scaremonger about the effects of making the rich pay fairer tax.”

He added: “With every day that passes the case for a change of direction at the Treasury grows.

"Instead of engaging in infighting in his own party the chancellor should listen to Labour’s calls for fairer taxes and increased investment, so we will build an economy for the many not the few.”

The Labour manifesto included plans for a 45 per cent tax rate for those earning £80,000 or more per year and £50 per cent for those on more than £123,000 a year.