Tax policy analysis

Tax reforms to improve economic performance

 

08/12/2010 - Many governments are facing historic high levels of deficit and debt. Public spending has risen and they are taking in less money as tax revenues fall - more than 10% in some countries.

 

Governments are attempting to consolidate their budgets, looking for the appropriate balance between

expenditure cuts and revenue increases. OECD’s “Tax Policy Reform and Fiscal Consolidation” says that for tax regimes to support sustainable economic growth governments must decide the right way to raise additional tax revenues.

 

Taxes can be a disincentive to work, invest and innovate, with adverse effects on economic growth and welfare.

 

But these distortions can be minimised:

• Change the overall tax structure to raise more revenue from taxes on consumption and residential

property tax and less from personal and corporate income taxes;
• Broaden tax bases to enable rates to be kept as low as possible;
• A “green” tax system, crucial to a Green Growth strategy, will achieve environmental objectives and

the additional revenues raised may facilitate wider growth-oriented tax reforms;
• Ensuring that all citizens pay their fair share of taxes contributes to fiscal consolidation.  OECD

initiatives to counter offshore non-compliance are yielding billions of euros in extra tax revenues.

 

These arguments are further explored in two Tax Policy Studies.

 

Tax Policy Study No. 19 details the rationale for tax breaks, asks whether they are still justified, and cites

case studies such as VAT reduced rates and tax reliefs for house buyers. It notes that ”tax expenditures” are often entrenched in tax regimes and urges countries to evaluate whether they are worthwhile.

 

Tax Policy Study No. 20 recommends ways to make taxes less distortive and more growth-friendly. It also looks at the “political economy” of tax reform – why governments are able to design, legislate and implement growth-oriented tax reforms in some circumstances and not others and how to overcome obstacles.

 

Tax reforms will only work if taxpayers agree they are fair. For example, reforms that recycle some of the

additional revenues to poorer households can be helpful. Governments must consider the distributional impact of the whole tax reform package – balancing the impact on taxpayers against future growth prospects and ensuring that all taxpayers continue to pay their fair share.

 

More information about these publications, including executive summaries, is available at www.oecd.org/tax.

 

OECD will release new data on tax revenues and tax-to-GDP ratios on Wednesday 15 December in the 2010 edition of the annual “Revenue Statistics”.

 

For further information, journalists are invited to contact Lawrence Speer on + 33-1 45 24 79 70.

 

 

 

Countries list

  • Afghanistan
  • Albania
  • Algeria
  • Andorra
  • Angola
  • Anguilla
  • Antigua and Barbuda
  • Argentina
  • Armenia
  • Aruba
  • Australia
  • Austria
  • Azerbaijan
  • Bahamas
  • Bahrain
  • Bangladesh
  • Barbados
  • Belarus
  • Belgium
  • Belize
  • Benin
  • Bermuda
  • Bhutan
  • Bolivia
  • Bosnia and Herzegovina
  • Botswana
  • Brazil
  • Brunei Darussalam
  • Bulgaria
  • Burkina Faso
  • Burundi
  • Cambodia
  • Cameroon
  • Canada
  • Cape Verde
  • Cayman Islands
  • Central African Republic
  • Chad
  • Chile
  • China (People’s Republic of)
  • Chinese Taipei
  • Colombia
  • Comoros
  • Congo
  • Cook Islands
  • Costa Rica
  • Croatia
  • Cuba
  • Cyprus
  • Czech Republic
  • Côte d'Ivoire
  • Democratic People's Republic of Korea
  • Democratic Republic of the Congo
  • Denmark
  • Djibouti
  • Dominica
  • Dominican Republic
  • Ecuador
  • Egypt
  • El Salvador
  • Equatorial Guinea
  • Eritrea
  • Estonia
  • Ethiopia
  • European Union
  • Faeroe Islands
  • Fiji
  • Finland
  • Former Yugoslav Republic of Macedonia (FYROM)
  • France
  • French Guiana
  • Gabon
  • Gambia
  • Georgia
  • Germany
  • Ghana
  • Gibraltar
  • Greece
  • Greenland
  • Grenada
  • Guatemala
  • Guernsey
  • Guinea
  • Guinea-Bissau
  • Guyana
  • Haiti
  • Honduras
  • Hong Kong, China
  • Hungary
  • Iceland
  • India
  • Indonesia
  • Iraq
  • Ireland
  • Islamic Republic of Iran
  • Isle of Man
  • Israel
  • Italy
  • Jamaica
  • Japan
  • Jersey
  • Jordan
  • Kazakhstan
  • Kenya
  • Kiribati
  • Korea
  • Kuwait
  • Kyrgyzstan
  • Lao People's Democratic Republic
  • Latvia
  • Lebanon
  • Lesotho
  • Liberia
  • Libya
  • Liechtenstein
  • Lithuania
  • Luxembourg
  • Macao (China)
  • Madagascar
  • Malawi
  • Malaysia
  • Maldives
  • Mali
  • Malta
  • Marshall Islands
  • Mauritania
  • Mauritius
  • Mayotte
  • Mexico
  • Micronesia (Federated States of)
  • Moldova
  • Monaco
  • Mongolia
  • Montenegro
  • Montserrat
  • Morocco
  • Mozambique
  • Myanmar
  • Namibia
  • Nauru
  • Nepal
  • Netherlands
  • Netherlands Antilles
  • New Zealand
  • Nicaragua
  • Niger
  • Nigeria
  • Niue
  • Norway
  • Oman
  • Pakistan
  • Palau
  • Palestinian Administered Areas
  • Panama
  • Papua New Guinea
  • Paraguay
  • Peru
  • Philippines
  • Poland
  • Portugal
  • Puerto Rico
  • Qatar
  • Romania
  • Russian Federation
  • Rwanda
  • Saint Helena
  • Saint Kitts and Nevis
  • Saint Lucia
  • Saint Vincent and the Grenadines
  • Samoa
  • San Marino
  • Sao Tome and Principe
  • Saudi Arabia
  • Senegal
  • Serbia
  • Serbia and Montenegro (pre-June 2006)
  • Seychelles
  • Sierra Leone
  • Singapore
  • Slovak Republic
  • Slovenia
  • Solomon Islands
  • Somalia
  • South Africa
  • South Sudan
  • Spain
  • Sri Lanka
  • Sudan
  • Suriname
  • Swaziland
  • Sweden
  • Switzerland
  • Syrian Arab Republic
  • Tajikistan
  • Tanzania
  • Thailand
  • Timor-Leste
  • Togo
  • Tokelau
  • Tonga
  • Trinidad and Tobago
  • Tunisia
  • Turkey
  • Turkmenistan
  • Turks and Caicos Islands
  • Tuvalu
  • Uganda
  • Ukraine
  • United Arab Emirates
  • United Kingdom
  • United States
  • United States Virgin Islands
  • Uruguay
  • Uzbekistan
  • Vanuatu
  • Venezuela
  • Vietnam
  • Virgin Islands (UK)
  • Wallis and Futuna Islands
  • Western Sahara
  • Yemen
  • Zambia
  • Zimbabwe