On 3 September 2020 the OECD issued Tax Policy Reforms 2020 setting out the reforms introduced by OECD countries and by Argentina, Indonesia and South Africa in the past year. This issue also includes China for the first time. The publication tracks tax policy developments and highlights current policy trends.

The report shows that governments have generally taken decision action to deal with the COVID-19 crisis. Much of the tax reform introduced at the beginning of the crisis aimed to help individuals and businesses get through the crisis period, especially in times of lockdown, but countries are now looking at tax stimulus measures to ensure that economic recovery is rapid and strong.

The OECD report looks at the trends in tax policy before the crisis, and also looks at measures taken in response to the crisis up to June 2020. Many countries have introduced significant fiscal packages to combat the economic effects of the crisis. The report identifies a phased approach under which the fiscal measures have been adapted to the changing situation as the crisis has developed. While initially income support for individuals and support for business liquidity was important, tax packages have developed to include measures to help expansion of the economy.

The report suggests that once economic recovery is underway the short-term crisis management should be replaced by structural tax reforms but the timing must be right. The report concludes that instead of returning to business as usual governments should look at moving towards a more inclusive and green economy.

The need to stabilise public finances will lead to more tax cooperation in areas such as exchange of information and projects to combat base erosion and profit shifting. Cooperation in preventing the escalation of tax and trade disputes will also be necessary. Taxation of the digital economy remains a concern to many countries and in the absence of international consensus some countries have introduced unilateral provisions as an interim measure to tax income from digital services.

The report also notes the continuation of some tax policy trends that were evident before the crisis, including individual tax reductions for low-income and middle-income households and stabilisation of value added tax (VAT) rates. Corporate tax rates were reduced in 2020 at a faster pace than in 2019. Progress has been made on measures connected to the OECD’s project on base erosion and profit shifting (BEPS) to combat international tax avoidance. Progress has also been made in connection with VAT collection from online sales of goods, services and intangibles.

Reforms have been made to property taxation, mostly involving higher tax rates. There has been only slow progress on environmental taxes. Also reforms to social security contributions have slowed, with just a few countries lowering rates.