OECD slams slowing tax reform progress

The pace of tax reforms has slowed across most leading economies and bolder tax reforms will be needed to address future challenges, according to a new OECD report

The Organisation for Economic Cooperation & Development (OECD) said that fewer countries have introduced comprehensive tax reform packages in 2019 compared to previous years.

The most comprehensive tax reform was introduced in the Netherlands, which included cuts to personal income tax, increases in VAT and the implementation of the EU’s Anti Tax Avoidance Directive. Other significant tax changes have been implemented in Lithuania (labour taxes), Australia (personal income taxes), Italy (corporate income tax) and Poland (personal and corporate income taxes).

But the OECD said that in other countries tax reforms in 2019 have been less significant and often undertaken in a piecemeal fashion.

Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration, said: ‘At a time when countries are facing many significant challenges, such as weakening economic growth, ageing populations, income and wealth inequality, the changing nature of work and climate change, the appetite for growth-enhancing, structural tax reforms seems to be waning.

‘In the face of these challenges, it is clear that bolder action is needed.’

The report highlights that corporate tax rate cuts have continued across countries, although they have been less significant than the ones introduced in 2018. Countries that are introducing the most significant corporate tax rate reductions tend to be those that have higher initial tax rates, leading to further convergence in corporate tax rates across countries.

Efforts to fight against corporate tax avoidance have progressed with the adoption of significant reforms in line with the OECD/G20 Base Erosion and Profit Shifting (BEPS) project. The tax challenges arising from the digitalisation of the economy continue to give rise to concerns, with some countries pursuing unilateral measures while global efforts to achieve a consensus-based multilateral solution continue.

The report also notes continued increases in excise duties on consumer products such as tobacco and sugar-sweetened beverages, and the introduction of new trade tariffs, which could lead to further escalations in the future.

But the pace of environmentally related tax reforms has slowed. Several countries have lowered their energy taxes or have weakened their commitment to better aligning energy taxation with climate costs, conflicting with environmental preservation objectives.

OECD Tax Policy Reforms 2019 

By Philip Smith

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