| Image Credits: “New York City Skyline at Blue Hour from the Top of the Rock HDR” by Katie Haugland Bowen
The latest edition of the “Tax Policy Reforms: OECD and Selected Partner Economies” provides a detailed analysis of tax reforms implemented or announced in 2023 across 90 jurisdictions, including all OECD countries. The report highlights trends in tax policy evolution, as governments grapple with complex economic challenges, including rising fiscal demands and the global cost-of-living crisis.
In 2023, policymakers were tasked with a difficult balancing act: increasing domestic revenue while extending tax relief to ease economic pressure on households and businesses. This led to a variety of tax reform strategies across countries. While some governments sought to broaden their tax bases and raise rates, others opted for targeted relief measures.
KEY FINDINGS FROM THE REPORT:
TAX POLICY SHIFTS:
-
A trend reversal from previous years, where base-broadening and rate increases were more common than tax cuts and reliefs.
-
The report notes a slowdown in rate cuts and base-narrowing measures observed during the pandemic and inflation crisis.
CORPORATE INCOME TAX (CIT):
-
For the first time since 2015, more jurisdictions increased CIT rates rather than reducing them.
-
This shift reflects the need for additional revenue, as statutory tax rates are already at historic lows in many countries.
-
Countries favor base-narrowing measures over further rate cuts to offer favorable CIT treatment to businesses.
GLOBAL MINIMUM TAX (GMT):
-
As of April 2024, 60 jurisdictions have committed to introducing or implementing the Global Minimum Tax, with 36 expected to apply it starting in 2024.
PERSONAL INCOME TAX (PIT) AND SOCIAL SECURITY CONTRIBUTIONS (SSC):
-
Governments continued to provide PIT relief to low- and middle-income households.
-
A growing number of jurisdictions are raising SSCs, reflecting the need to finance social protection, particularly in light of population aging and healthcare costs.
-
Some countries introduced progressive reforms, shifting the tax burden away from low-income households.
VALUE ADDED TAX (VAT):
-
After a period of extensive VAT cuts on energy products to alleviate inflationary pressures, the report shows a slowdown in such measures.
-
Several jurisdictions scaled back VAT relief on energy products, while others used VAT reductions to promote clean energy investments, such as electric vehicles and solar panels.
EXCISE TAXES:
-
High-income countries intensified health-related excise taxes on tobacco, alcohol, sugary drinks, and gambling.
-
Despite inflation-induced challenges, carbon taxes were increased in some high-income countries to support the transition to a low-carbon economy.
The 2023 tax reforms reflect the evolving global economic environment. Countries are increasingly shifting from broad-based support measures to more targeted responses, seeking to balance fiscal sustainability with social and environmental goals. While tax relief remains crucial, especially for households, governments are focusing on revenue generation and tax equity, indicating a shift towards more sustainable long-term tax strategies.
SOURCE/RECOMMENDED READ:
- Full Report can be downloaded via this link: Tax Policy Reforms 2024 | OECD
