Tax Reforms to Improve Economic Performance
Tax reforms to improve economic
Many governments are facing historic high levels of deficit and debt. Public spending has risen and they are taking in less money as tax revenues fall - more than 10% in some countries.
attempting to consolidate their budgets, looking for the
appropriate balance between expenditure cuts and revenue
increases. The OECD's "Tax Policy Reform and Fiscal
Taxes can be a disincentive to work, invest and innovate, with adverse effects on economic growth and welfare. But these such distortions can be minimised: * Change the overall tax structure to raise more revenue from taxes on consumption and residential property tax and less from personal and corporate income taxes; * Broaden tax bases to enable rates to be kept as low as possible; * A "green" tax system, crucial to a Green Growth strategy, will achieve environmental objectives and the additional revenues raised may facilitate wider growth-oriented tax reforms; * Ensuring that all citizens pay their fair share of taxes contributes to fiscal consolidation. OECD initiatives to counter offshore non-compliance are yielding billions of euros in extra tax revenues.
These arguments are further explored in two Tax Policy Studies.
Tax Policy Study No.
Policy Study No. 20
Tax reforms will only work if taxpayers agree they are fair. For example, reforms that recycle some of the additional revenues to poorer households can be helpful. Governments must consider the distributional impact of the whole tax reform package - balancing the impact on taxpayers against future growth prospects and ensuring that all taxpayers continue to pay their fair share.
information about these publications, including executive
summaries, is available at www.oecd.org/ctp