Tax Policy Reform and Economic Growth
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 pro-growth 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.
Published on November 03, 2010
In series:OECD Tax Policy Studiesview more titles