In the wake of the recent financial and economic crisis, many OECD countries face the challenge of restoring public finances while still supporting growth. This report investigates how tax structures can best be designed to support GDP per capita growth.
The analysis suggests a tax and economic growth ranking order according to which corporate taxes are the most harmful type of tax for economic growth, followed by personal income taxes and then consumption taxes, with recurrent taxes on immovable property being the least harmful tax.
Growth-oriented tax reform measures include tax base broadening and a reduction in the top marginal personal income tax rates. Some degree of support for R&D through the tax system may help to increase private spending on innovation.
But implementing growth-oriented tax reforms may not be easy. This report identifies those public and political economy tax reform strategies that will allow policy makers to reconcile differing tax policy objectives and overcome obstacles to reform. It stresses that with clear vision, strong leadership and solid tax policy analysis, growth-oriented tax reform can indeed be realised.
Part I: Taxation and Economic Growth Recommendationsand Reforms in OECD Countries
Chapter 1. Growth-oriented Tax Policy Reform Recommendations
Chapter 2. How Do Trends in the Composition of Tax Receipts and in Tax Rates Compare with the “Tax and Growth” Recommendations?
Part II: Making Growth-oriented Tax Reforms Happen
Chapter 3. Obstacles to Fundamental Tax Reforms
Chapter 4. Strategies for Successfully Implementing Growth-oriented Tax
Part III: Further Analysis of the “Tax and Growth” Tax Policy Recommendations
Chapter 5. Tax Design Considerations
Chapter 6. Taxation, Economic Growth and Sustainable Tax Revenues
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OECD Tax Policy Analysis Department