Debt May Drive Taxes

A rebound in the global economy is set to kick off the beginning of this decade. But this return to growth may be accompanied by a surge of another sort -- in the amount you, the taxpayer, are about to pay to government.

The great global recession exacerbated the state of budget balances in much of the developed world. The debt burden among Group of 20 nations is expected to rise to over 120% of GDP, up from roughly 80% before the onset of the recession.

Legislators have to restore fiscal order or risk credit downgrades, such as Greece has sustained in recent weeks. Spending restraint is an option, but history dictates politicians find this hard to do -- especially with an aging population that's expecting social security and health care.

"Countries like Japan, Britain and the U.S. with large public deficits and growing debt are painting themselves into a corner whereby tax increases will be a necessity in order to stabilize debt burdens," says Jack Mintz, a leading tax expert and a professor at the University of Calgary's school of public policy.

"While governments will look to raise taxes in the most politically acceptable way, which often means imposing higher levies on the rich and corporations, there is little room for manoeuvre."

Source: Paul Vieira, Financial Post