TAX POLICY REFORMS 2018 OECD AND SELECTED PARTNER ECONOMIES

Summary of key findings

• Country coverage: 35 OECD countries + Argentina, Indonesia and South Africa

• Objective: Identify major tax reforms and tax policy trends across countries

Tax Policy Reforms series: 2018 edition

2

Global economic growth has picked up

0

1

2

3

4

5

6

7

8

0

1

2

3

4

5

6

7

8

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 Q42011 2012 2013 2014 2015 2016 2017

World OECD¹ non-OECD

Source: OECD Economic Outlook 103 database

Real GDP growthYear-on-year percentage changes

3

Tax revenues have reached a new record level

24.8

34.3

0

5

10

15

20

25

30

35

40

45

50

55

1965 1975 1985 1995 2005 2015

Range Average

Long-term evolution of the OECD average tax-to-GDP ratio (1965 – 2016)

% of GDP

Source: OECD Global Revenue Statistics Database4

Summary of key tax trends in 2018

Small cuts in personal income taxes for low and middle income earners

Continued corporate tax rate cuts, led by countries with high tax ratesProgress on BEPS implementation

Stabilisation of VAT ratesBut more VAT revenues expected from administrative and anti-fraud measures

Increased/new excise taxes on harmful consumption (e.g. taxes on sugary drinks)

Environmentally related tax reforms focused on energy and vehicles but insufficient

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

Continued but small personal income tax cuts

targeted at low and middle income earners

% of labour costs

Source: OECD Taxing Wages Database6

Average tax wedge as a percentage of labour costs for workers earning the average wage in 2017

But tax wedges will remain high in many countries

% of labour costs

Source: OECD Taxing Wages Database7

Continuing corporate income tax rate reductions…

32.5

25.723.9

15

20

25

30

35

40

45

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

OECD average G7 average OECD non-G7 average

Evolution of the average combined CIT rates in the OECD, OECD G7 and non-G7 countries between 2000 and 2018

%

Source: OECD Tax Database and Annual Tax Policy Reform Questionnaire8

…led by countries with traditionally high CIT rates

0

10

20

30

40

50

60

2018 2000 2017

Top combined statutory CIT rates in 2000, 2017 and 2018

%

Source: OECD Tax Database and Annual Tax Policy Reform Questionnaire9

• 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

Efforts to fight against international tax avoidance have continued

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

Note: 2015 data used for Australia, Greece, Indonesia, Mexico and South AfricaSource: OECD Global Revenue Statistics Database

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Taxes on financial and capital transactions Estate, inheritance and gift taxes Recurrent taxes on net wealthRecurrent taxes on immovable property Other Total property tax revenues in 2000

% of GDP

15

• 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

Going forward

16

Contact details

David BradburyHead of the Tax Policy and Statistics DivisionDavid.Bradbury@oecd.org / tel: +33 1 45 24 15 97

Sarah PerretEconomist, Tax Policy and Statistics DivisionSarah.Perret@oecd.org / tel: +33 1 45 24 79 72

17