Tax reforms vital for global economic recovery post COVID-19: OECD

The report titled ‘Tax Policy Reforms 2022’ describes recent tax reforms across 71 countries and jurisdictions, including all OECD members and selected members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting.

The report finds that tax reforms — notably reductions in taxes on labour and more generous corporate tax incentives — have been among the key policy tools that countries have used to stimulate growth and promote economic recovery from the pandemic.

As energy prices rose steeply from the second half of 2021, countries moved quickly to shield households and businesses by providing temporary fiscal support — including tax cuts — and by tapering existing stimulus measures that could add to inflation.

“Recent tax reforms have been targeted at stimulating economic recovery from COVID-19, while countries with the greatest fiscal space have been providing more generous tax benefits for longer periods of time,” Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration, said in a press release. “Countries have also used tax policy as one of their main tools in responding to rapid rises in energy prices.”

Personal income taxes and social security contributions were reduced in 2021 in almost all countries covered in the report, with most reductions targeted at lower-income households to support employment and provide in-work benefits. Many countries also increased corporate tax incentives to stimulate investment and innovation.

The most significant VAT (value-added tax) reforms focused on the digital economy and e-commerce, including strong growth in e-invoicing and digital reporting requirements. Property tax reforms were less common in 2021, with a small number of countries implementing measures to reduce the use of properties as investment vehicles and improve equity in the housing market, added the release.

A special feature in this year’s report highlights how tax policy has been used by governments to provide significant support to households and businesses, shielding them from the impact of high energy prices. The report notes that the measures introduced through mid-2022 to lower the price of energy were rapidly deployed and often relatively simple to implement.

However, the report also suggests that governments could provide more targeted measures for at-risk groups, improve the resilience of households that are vulnerable to price shocks, and accelerate the development of alternative sources of energy and modes of transport.

Fibre2Fashion News Desk (NB)