An overhaul of the U.S. tax system could help promote growth but structural reforms need to be made, the secretary general of the Organisation for Economic Co-operation and Development (OECD) told CNBC at the World Economic Forum in Davos, Switzerland.
"On the face of it you're talking about lowering corporate taxes, promoting repatriation (of taxes) and the big infrastructure program, and that all adds to more growth — hence this very great interest (in the overhaul) and the 26,000 mark in the stock market," Angel Gurria told CNBC on Wednesday.
"(But) regardless of what tax structure you have, structural change has to happen. We've run out of room, or almost, on monetary and fiscal policy and the problem is we are measuring the fact, objectively that structural change is slowing down when it needs to be accelerating," he said.
Gurria's comments come after the U.S. government under President Donald Trump passed sweeping changes to the country's tax system, cutting corporate tax rates from 35 percent to 21 percent and some individual tax rates, as well as changes to several tax breaks.
It is expected that the tax cuts will encourage economic growth and will boost tax revenues over time although its detractors say the richest will benefit most and that the U.S. deficit will grow massively before any benefits are felt.
Gurria said that changes to the tax system needed to be done in conjunction with structural reforms that would help to make the economic recovery sustainable. These included, according to Gurria, reforms to education, regulation, competition, flexibility in the labor market and product market, and research and development.
"These are all the things that will make the recovery sustainable," he said.