On 21 September 2022 the OECD published the latest edition of Tax Policy Reforms: OECD and Selected Partner Economies. This is an annual publication providing comparative information on tax reforms in a number of countries. The latest report looks at the tax policy reforms made in 71 member jurisdictions of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS), including all the OECD countries, in 2021.
In addition to looking at the macroeconomic background to the changes in tax policy, the report provides an overview of economic developments worldwide and sets out the latest trends in tax revenues and the composition of taxes. There is a detailed description of tax reforms announced or implemented in the calendar year 2021, analysed across different tax categories.
The latest edition includes a special feature looking at the measures countries have introduced to manage the problems arising from the increases in energy prices. The report offers policy recommendations for the situation that would arise if prices remain high for some time.
The latest edition highlights the general trends behind tax policy changes, including the effects of the crisis caused by the pandemic and measures taken to safeguard populations. Tax policy was influenced by non-tax factors such as the course of the pandemic in particular countries and the availability and take-up of vaccines. An important issue for governments was to modify the tax policy in response to changes in the course of the pandemic, and to determine the correct timing of measures to phase out support to households and businesses while boosting investment and economic recovery. Policy decisions were influenced by the amount of fiscal space available and the ability to use the tax and social transfer systems to target support measures. This meant that countries with more developed tax and welfare systems were in a better position to determine the timing of measures and target the sectors to be supported.
Personal income tax
Although changes to the rates of personal income tax were not as frequent as in previous years, measures were taken to narrow the tax base for income tax and target the measures towards low and middle income households. Some measures were taken to reduce social security contributions but these were mainly temporary.
Corporate income tax
A number of countries increased their corporate tax incentives to boost investment and promote environmental sustainability, and a small number reduced their corporate tax rates. International tax cooperation increased with the agreement by 137 countries to a two-pillar solution on taxation of large multinational groups.
Value added tax
There were not many changes to value added tax (VAT) rates but in a number of countries the VAT base was modified as the temporary VAT reductions for specific sectors introduced at the start of the pandemic were reversed. In 2021 some countries decided to apply reduced VAT rates to a range of goods and services on a permanent basis, retaining zero rates or VAT exemptions for medical products related to the pandemic. There were extensive reforms to VAT on e-commerce, such as expansion of e-invoicing and digital reporting requirements.
Environmental taxes
Policy on taxing energy and vehicle use is based on the need for sustainability. Explicit carbon taxes on fuel were increased in the year and a few countries introduced new carbon taxes. Effective carbon prices are still generally low, reduced by temporary cuts in energy taxes around the end of the year.
Property tax
Property tax reforms mostly included tax rises, with increases in tax rates or measures to broaden the tax base. Measures were aimed at promoting the efficient use of existing housing and increasing the fairness of property taxation.