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Countries have continued the trend towards implementing tax policy reforms as part of wider strategies to boost growth, with a growing focus on reducing inequalities and driving behavioural change, according to a new report from the OECD.
Growth-stimulus through the tax system is being driven by cuts in corporate income tax rates, with 12 countries taking steps toward lower standard corporate tax rates during 2016, often as part of a gradual multi-year corporate tax reform. This continues a trend toward increased international tax competition identified in last year's publication. At the same time, international cooperation to tackle base erosion and profit shifting (BEPS) is increasing, with countries implementing internationally agreed measures to protect their corporate tax bases against international tax avoidance.
Governments are rightly placing growth and inclusiveness at the heart of their tax reform efforts, said OECD Secretary-General Angel Gurr. Monitoring changes in the global tax policy landscape provides high-quality information on the trends shaping tax policy, which can help policy makers with the design and assessment of future reforms for the benefit of their citizens.
Personal income tax cuts were enacted in many countries in 2016, generally increasing the progressivity of tax systems. This included cuts in personal income tax rates on low or middle income earners in 15 countries. Nonetheless, taxes on labour remain high overall and, with a few exceptions, there were only limited reductions in social security contributions in 2016.
With taxes on labour remaining high in many countries, further action will be required to enhance incentives for employment and the creation of jobs so that tax systems become more conducive to inclusive growth, said Mr Gurr.
The tax mix continues to shift towards labour and consumption taxes, although standard VAT-rates appear to have stabilised in 2016, with only one country (Greece) introducing an increase to its standard VAT rate. We are also seeing widespread implementation of the International VAT/GST Guidelines.
Excise duties, particularly on tobacco, as well as taxes targeting transport fuels generally increased in 2016, as did incentives for the purchase and use of electric and hybrid vehicles. However, fuels used outside of the transport sector, which also cause considerable harm to the environment, continue to be taxed at relatively low rates.
Changes to property-related taxes increased in 2016, when compared to 2015, with a number of governments increasing recurrent taxes on immovable property, as well as introducing transaction taxes on both movable and immovable property.
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