Tax policy analysis

Tax Policy Working Papers

 

Working papers from the Centre for Tax Policy and Administration of the OECD that cover the full range of the centre’s work on taxation with the main focus on tax policy related issues.

 

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The Diesel Differential: Differences in the Tax Treatment of Gasoline and Diesel for Road Use

Paper n°: 21 

Author: Michelle Harding

 

Diesel and gasoline account for around 95% of energy used for road transport in the OECD and for the largest share of revenue from taxes on energy. In 33 out of 34 OECD countries, diesel fuel is taxed at lower rates than gasoline both in terms of energy and carbon content. To assess whether this difference is warranted from an environmental perspective, this paper examines the rationales for taxing both fuels, considering the externalities (including local air pollution, carbon emissions and other social costs related to road transport) associated with the use of each fuel and the fuel efficiency advantage of diesel vehicles.

 

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Personal Tax Treatment of Company Cars and Commuting Expenses: Estimating the Fiscal and Environmental Costs

Paper n°: 20 

Author: Michelle Harding

 

Company cars form a large proportion of the car fleet in many OECD countries and are also influential in determining the composition of the wider vehicle fleet. When employees provided with a company car use that car for personal purposes, personal income tax rules value the benefit in a number of different ways. How accurate these rules are in valuing the benefit has important implications for tax revenue, the environment and other social impacts such as congestion. This paper outlines the tax treatment of company cars and commuting expenses in 27 OECD countries and one partner country.

 

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Taxation of Dividend, Interest, and Capital Gain Income

Paper n°: 19 

Author: Michelle Harding

 

This paper provides an overview of the differing ways in which capital income is taxed across the OECD. It provides an analytical framework which summarises the statutory tax treatment of dividend income, interest income and capital gains on shares and real property across the OECD, considering where appropriate the interaction of corporate and personal tax systems. It describes the different approaches to the tax treatment of these income types at progressive stages of taxation and concludes the discussion of each income type by summarising the different systems in diagrammatic form.

 

Tax policy working paper series image No18 

Tax Policy and Tax Reform in the People's Republic of China

Paper n°: 18 

Author: Bert Brys, Stephen Matthews, Richard Herd, Xiao Wang

 

This paper compares the tax system in China with the tax system in OECD countries and the tax reforms China and OECD countries have implemented in the past. The analysis focuses on those taxes and tax issues which are currently on China’s reform agenda, including the consumption taxes (especially the integration of the "business tax" into the VAT), environmentally-related taxes, the personal income tax, fiscal relations between the central and sub-central levels of government and property taxes

 

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The Tax Policy Landscape Five Years after the Crisis

Paper n°: 17 

Author: Pierre LeBlanc, Stephen Matthews, Kirsti Mellbye

 

The height of the economic and financial crisis is now well past, but its aftermath remains wide-ranging, with many OECD countries still some way from restoring strong and sustainable economic growth. Even before the Great Recession OECD economies faced a range of challenges, most notably from globalisation, but also other challenges such as climates change, growing inequality and population ageing. Against this background, this paper discusses how tax policies have responded to fiscal and macroeconomic developments over the past five years and these longer-term structural economic developments.

 

Effective Personal Tax Rates on Marginal Skills Investments in OECD Countries 

Effective Personal Tax Rates on Marginal Skills Investments in OECD Countries: A New Methodology

Paper n°: 16 

Author: Bert Brys and Carolina Torres

 

This paper presents a new methodology to calculate effective tax rates on the marginal return on an investment in skills within a discounted cash-flow investment framework. This framework can be used to analyse the financial incentives to invest in skills and the impact of different policies for financing post-secondary education and/or professional training. The paper looks in particular at the effects of personal taxes (possibly net of benefits received) on incentives to acquire skills by estimating the effective tax rate on the return on a marginal skill investment – that is, one where the resulting increase in earnings is just enough to make the investment financially worthwhile; this "margin" can span multiple years.

 

Tax Policy Working Paper No15 

Average Personal Income Tax Rate and Tax Wedge Progression in OECD Countries

Paper n°: 15 

Author: Dominique Paturot, Kirsti Mellbye, Bert Brys

 

The statutory progressivity of the income taxes paid by wage earners, net of the standard cash benefits they receive, depend on the design and interaction of personal income taxes, social security contributions (SSCs) and cash benefits. In order to capture their combined impact, this paper presents statutory tax progressivity indicators for the 34 OECD member countries on the basis of average effective income tax rates and tax wedges which are calculated using the OECD’s Taxing Wages framework. The analysis shows a decreasing pattern of tax progressivity across income levels. In some countries, the tax system becomes regressive when the SSC ceiling has been reached.

 

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Modelling the Tax Burden on Labour Income in Brazil, China, India, Indonesia and South Africa

Paper n°: 14 

Authors: Luca Gandullia, Nicola Iacobone, Alastair Thomas

 

This paper examines the taxation of labour income in five key emerging economies: Brazil, China, India, Indonesia and South Africa (the "BIICS" countries). The paper highlights the key features of the taxation of labour income in these countries, and then uses this information to model the tax burdens on labour income in each country following the OECD's Taxing Wages methodology. Average and marginal tax wedges in Brazil and China (Shanghai) are found to be similar in size in 2010 to those of many OECD countries. In contrast, India, Indonesia and South Africa (as well as rural China) impose very low average and marginal tax wedges compared to the vast majority of OECD countries.

 

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Taxes and Investment in Skills

Paper n°: 13 

Authors: Carolina Torres (OECD)

 

This paper considers the influence of taxes on the financial incentive to invest in human capital and explores the tax treatment of private investment by individuals and employers in post-compulsory education and lifelong learning in 31 OECD countries, India and South Africa. The paper describes targeted personal, corporate and value added tax measures related to education and training and analyses them in terms of their impacts on the incentive to acquire skills and their distributional effects. The desirability of different forms of tax relief for skills formation is examined from the point of view of efficiency, equity and administrative simplicity within the broader context of fiscal policy and the role of government in skills formation beyond compulsory education.

 

Trends in Personal Income Tax and Employee Social Security Contribution Schedules. 

Trends in Personal Income Tax and Employee Social Security Contribution Schedules

Paper n°: 12

Authors: Carolina Torres, Kirsti Mellbye, Bert Brys

 

Policymakers cannot directly adjust the tax burden of labour income, but they can reform the statutory elements of the tax system, which ultimately determine average and marginal tax rates. To shed light on the determinants of average and marginal personal tax rates, this paper discusses historical and cross-country trends in statutory personal income tax rates, the income thresholds where personal income tax and employee social security contribution rates apply, and other statutory provisions that shape the tax burden on labour income in OECD countries. Trends in the difference between statutory, average and marginal personal income tax rates are also analysed and graphically illustrated. 

 

Shifting from Social Security Contributions to Consumption Taxes. The Impact on Low-Income Earner Work Incentives  

Shifting from Social Security Contributions to Consumption Taxes
The Impact on Low-Income Earner Work Incentives

Paper n°: 11 

Authors: Alastair Thomas, Fidel Picos-Sánchez

 

This paper investigates the merits of increasing work incentives for low-income workers by shifting part of the tax burden from social security contributions (SSC) to consumption taxes (specifically VAT) in 13 European OECD countries. Simulation results based on household budget survey microdata show that such reforms will increase work incentives for low-income workers at both participation and hours-worked margins. However, these increases will generally be small as part of the VAT increase will still be borne by low-income workers. 

 

 

Wage Income Tax Reforms and Changes in Tax Burdens: 2000-2009

Paper n°: 10 

Author: Bert Brys

 

The tax burden on labour and its evolution over time are issues that feature prominently in the political debate. Averaged across the OECD, personal income taxes, social security contributions and payroll taxes together account for more than 51% of total government revenues in 2008 (OECD, 2010).

 

 

Taxation and Innovation

Paper n°: 9 

Author: Pamela Palazzi

 

Innovation is the cornerstone of sustained economic growth and prosperity. In a globalised world, innovation is a key driver of competitiveness between businesses and it plays a critical role in the rapid growth of emerging economies.

 

 

Non-Tax Compulsory Payments as an Additional Burden on Labour Income

Paper n°: 8 

Author: Bert Brys

 

In 23 of the 34 OECD member countries, it is compulsory for employers and/ or employees to make additional payments, in addition to taxes and social security contributions, which increase the overall burden on labour income. These non-tax compulsory payments, which are typically paid to privatelymanaged funds, will either increase the employer’s labour costs or reduce the employee’s net take-home pay in a similar way to taxes, although they do not necessarily have the same behavioural impact.

 

 

Consumption Taxation as an Additional Burden on Labour Income

Paper n°: 7 

Author: Fidel Picos-Sánchez

 

The OECD’s Taxing Wages (TW) Report1 provides details of taxes paid on wages in the 34 OECD member countries. In particular, it covers the personal income tax and social security contributions paid by employees and their employers, as well as cash benefits received by families.

 

 

Corporate Taxation and SMEs: The Italian Experience

Paper n°: 6 

Author: Marco Manzo

 

This paper focuses on the tax impediments faced by small and medium-sized enterprises in Italy. The fact that small businesses are characterized by financing constraints and have less access to bank loans is often emphasized as an argument in favour of a special tax treatment for small enterprises. On the one hand, however, the evidence that SMEs suffer severe financing constraints is not overwhelming; on the other hand, tax relief for SMEs is not necessarily the best response to financial market imperfections.

 

 

The Evaluation of the Effe‌ctiveness of Tax Expenditures - A Novel Approach

Paper n°: 5 

Author: Antonella Caiumi

 

This study evaluates the regional tax incentives for business investment in Italy and addresses the following questions: (i) how much additional investment was stimulated by the government intervention; (ii) has the public financing displaced (part of) the private financing; (iii) to what extent would the outcomes on firm performance have not been achieved without the public support?

 

 

Trends in Top Incomes and their Tax Policy Implications

Paper n°: 4 

Author: Stephen Matthews

 

This paper uses data derived from tax returns to analyse trends in the share of pre-tax personal income going to top income recipients. These data provide a more reliable source of information on top incomes than household surveys and allow a perspective of almost a century. Since the early 1980s there has been a recovery in the share of top incomes, especially in the share of the top percentile group.

 

 

Making Fundamental Tax Reform Happen

Paper n°: 3 

Author: Bert Brys

 

This paper discusses the objectives of tax reform and explores the most important environmental factors that influence the reform process, focusing on the circumstances that explain when these objectives and environmental factors may become an obstacle to the design and implementation of tax policies. The second part of this paper discusses strategies that might help policy makers to successfully implement fundamental tax reforms.

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What is a "Competitive" Tax System?

Paper n°: 2 

Author: Stephen Matthews

 

This paper was prepared for the High Level Conference on “Challenges in Designing Competitive Tax Systems”, which took place at the OECD on 30 June 2011. This conference was held within the framework of the OECD 50th Anniversary. At this conference, ministers and senior tax policy officials reviewed trends in tax reform over 50 years, discussed emerging pressures on competitiveness of tax systems and how to achieve successful reforms in the 21st century. The paper considers how tax policy and administration impact on an economy’s competitiveness and reviews various measures of ‘tax competitiveness’.

 

 

Tax Reform Trends in OECD Countries

Paper n°: 1

Authors: Bert Brys, Stephen Matthews, Jeffrey Owens

 

Over the last two decades almost all OECD countries have made major structural changes to their tax systems. In the case of the personal and corporate income tax regimes reforms have generally been rate reducing and base broadening, following the lead given by the United Kingdom in 1984 and the United States in 1986. In some countries, including Australia and New Zealand, reforms have been profound and sometimes implemented over a very short period of time. In others, including most of Europe, Japan and many other Asian countries, reform has been a gradual process of adaptation.

 

Related Documents

 

OECD Tax Policy Studies

OECD Consumption Tax Trends Publications

Fiscal Federalism Network Working Papers

 

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