TAX POLICY REFORMS 2018 OECD AND SELECTED PARTNER ECONOMIES Summary of key findings
Tax Policy Reforms series: 2018 edition Country coverage: 35 OECD countries + Argentina, Indonesia and South Africa Objective: Identify major tax reforms and tax policy trends across countries 2
Global economic growth has picked up Real GDP growth Year-on-year percentage changes World OECD¹ non-oecd 8 7 6 5 4 3 2 1 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2011 2012 2013 2014 2015 2016 2017 8 7 6 5 4 3 2 1 0 Source: OECD Economic Outlook 103 database 3
Tax revenues have reached a new record level Long-term evolution of the OECD average tax-to-gdp ratio (1965 2016) Range Average 55 50 % of GDP 45 40 35 34.3 30 24.8 25 20 15 10 5 0 1965 1975 1985 1995 2005 2015 Source: OECD Global Revenue Statistics Database 4
Summary of key tax trends in 2018 Small cuts in personal income taxes for low and middle income earners Increased/new excise taxes on harmful consumption (e.g. taxes on sugary drinks) Continued corporate tax rate cuts, led by countries with high tax rates Progress on BEPS implementation Environmentally related tax reforms focused on energy and vehicles but insufficient Stabilisation of VAT rates But more VAT revenues expected from administrative and anti-fraud measures A few significant property tax changes 5
The slow decline in the tax burden on labour income is likely to continue Evolution of the OECD average tax wedge on labour income for the average worker between 2000 and 2017 % of labour costs Continued but small personal income tax cuts targeted at low and middle income earners Source: OECD Taxing Wages Database 6
But tax wedges will remain high in many countries Average tax wedge as a percentage of labour costs for workers earning the average wage in 2017 % of labour costs Source: OECD Taxing Wages Database 7
Continuing corporate income tax rate reductions Evolution of the average combined CIT rates in the OECD, OECD G7 and non- G7 countries between 2000 and 2018 OECD average G7 average OECD non-g7 average 45 % 40 35 32.5 30 25 25.7 23.9 20 15 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: OECD Tax Database and Annual Tax Policy Reform Questionnaire 8
led by countries with traditionally high CIT rates Top combined statutory CIT rates in 2000, 2017 and 2018 2018 2000 2017 60 % 50 40 30 20 10 0 Source: OECD Tax Database and Annual Tax Policy Reform Questionnaire 9
Efforts to fight against international tax avoidance have continued Tax base changes Expanded depreciation allowances Very limited changes to R&D and innovation-related tax incentives BEPS and anti-avoidance measures Numerous BEPS and anti-avoidance measures but efforts have varied across countries Digital economy No global consensus, but countries have agreed to work towards a long-term solution by 2020 10
Standard VAT rates appear to have plateaued Long-term evolution of the OECD average standard VAT rate (1970 2018) % Source: OECD Tax Database and Annual Tax Policy Reform Questionnaire 11
More VAT revenues expected from administrative and anti-fraud measures Increasing reporting obligations for taxpayers Data sharing obligations, incl. accounting data Transmission of invoicing information (incl. real time) Implementation of advanced risk-based compliance strategies Testing alternative VAT collection mechanisms Domestic reverse-charge regime Split-payment mechanisms Enlisting digital platforms in the collection of VAT on online sales 12
Green tax measures have continued to focus predominantly on energy Taxes on energy use Most frequent type of green tax reform Some efforts to align tax rates more closely with the carbon content of fuels, including outside of road transport But reforms remain insufficient Vehicle taxes Increasingly used to encourage the purchase and use of cleaner vehicles But experience has shown that, even if they are effective, they can be a costly emissions reduction policy Other green taxes Very few other environmentally related tax reforms (e.g. taxes on waste, plastic bags, chemicals) 13
but remain insufficient to address environmental challenges Proportion of carbon emissions subject to different levels of effective tax rates in 2012 and 2015 Note: All tax rates are expressed in 2012 prices. Carbon emissions from biomass emissions are included. Source: OECD Taxing Energy Use 2018 14
Despite a few recent reforms, property taxes still play a relatively limited role Property tax revenues as a share of GDP in 2000 and 2016 4.5 4.0 Taxes on financial and capital transactions Estate, inheritance and gift taxes Recurrent taxes on net wealth Recurrent taxes on immovable property Other Total property tax revenues in 2000 % of GDP 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Note: 2015 data used for Australia, Greece, Indonesia, Mexico and South Africa Source: OECD Global Revenue Statistics Database 15
Going forward Avoid excessively pro-cyclical tax policy in a context of economic recovery Critical need to continue cooperating to avoid harmful tax competition Continued focus on inclusiveness Significant progress needed on environmentally-related taxation 16
Contact details David Bradbury Head of the Tax Policy and Statistics Division David.Bradbury@oecd.org / tel: +33 1 45 24 15 97 Sarah Perret Economist, Tax Policy and Statistics Division Sarah.Perret@oecd.org / tel: +33 1 45 24 79 72 17