On 14 September 2018 the OECD issued Tax Policy Reforms 2018, summarizing the tax policy reforms carried out in the year by OECD countries and by Argentina, Indonesia and South Africa.
Corporate income tax
The report notes that significant tax reforms were introduced in Argentina, France, Latvia and the US during 2018. These reforms aimed to support investment by reducing corporate tax rates and amending personal income tax and property taxes. There were also efforts to reduce tax for low and middle income earners. Belgium also reformed its corporate tax in the year by reducing rates and broadening the tax base.
More generally there was an acceleration of cuts to corporate income tax rates worldwide. This has been combined with reforms to narrow the tax base, for example by expanding depreciation allowances to encourage investment. Relatively few changes have been made this year to tax incentives for research and development or innovation.
There have been widespread efforts to protect the corporate tax base from international tax avoidance by implementing the OECD/G20 measures combating base erosion and profit shifting (BEPS), together with other anti-avoidance measures. The extent of these measures has varied from one country to another.
Another concern is the correct taxation of digital businesses. So far no common approach has been adopted and countries have adopted a range of measures. This risks giving rise to increased complexity and uncertainty.
Personal income tax
The report noted a trend to increase earned income tax credits to encourage participation in the labour market and improve the progressivity of personal income tax. Tax rates on personal income from capital have tended to rise. Reforms to social security contributions have been more limited with a focus on increases to the rates of contributions and some narrowing of the base for contributions.
Value added tax
Value added tax (VAT) rates have remained stable but more revenue is being recovered from anti-fraud measures in some countries. Countries often already have high VAT rates and are attempting to raise more revenue through measures to broaden the VAT base. Some countries have expanded the items charged at lower rate in the interests of fairness or to support specific industries but such measures tend to be poorly targeted.
Excise taxes
Some new excise taxes have been introduced on harmful items in addition to the customary excise taxes on alcohol and tobacco. Some countries including South Africa, Ireland and the UK have introduced taxes on sweetened beverages.
Environmental taxes
Tax reforms relating to the environment have focused on energy taxes but more significant reforms will be required to align energy tax rates with environmental costs. There are continuing amendments to vehicle taxes to encourage cleaner vehicles but this can be a costly policy. Other environmental tax reforms have been less frequent, including tax on waste, plastic bags or chemicals.
Property taxes
There have only been a few property tax reforms in the year. The exemption threshold for the estate and gift tax in the US was doubled and Belgium introduced a tax on securities accounts. France repealed the housing tax for 80% of households and eliminated the net wealth tax, this being replaced by a tax on real estate wealth.
