Tax Policy Reform and Economic Growth
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Tax Policy Reform and Economic Growth

In the wake of the recent financial and economic crisis, many OECD countries face the challenge of restoring public finances while still supporting growth. This report investigates how tax structures can best be designed to support GDP per capita growth.  

The analysis suggests a tax and economic growth ranking order according to which corporate taxes are the most harmful type of tax for economic growth, followed by personal income taxes and then consumption taxes, with recurrent taxes on immovable property being the least harmful tax. Growth-oriented tax reform measures include tax base broadening and a reduction in the top marginal personal income tax rates. Some degree of support for R&D through the tax system may help to increase private spending on innovation. 

But implementing pro-growth tax reforms may not be easy. This report identifies those public and political economy tax reform strategies that will allow policy makers to reconcile differing tax policy objectives and overcome obstacles to reform. It stresses that with clear vision, strong leadership and solid tax policy analysis, growth-oriented tax reform can indeed be realised.

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Publication Date :
03 Nov 2010
DOI :
10.1787/9789264091085-en
 
Chapter
 

How Do Trends in the Composition of Tax Receipts and in Tax Rates Compare with the "Tax and Growth" Recommendations? You do not have access to this content

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Author(s):
OECD
Pages :
25–44
DOI :
10.1787/9789264091085-4-en

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The level and mix of taxation vary markedly across OECD countries but there have been a number of common trends.Many countries have cut personal and corporate tax rates while broadening the tax base and increasing social security contributions. Meanwhile, there has been an increased use of value-added taxes and a general trend to higher VAT rates. The data presented in this chapter shows to which degree countries have followed strategies with regard to the composition of tax revenues and changes in statutory tax rates that are similar to the "tax and growth" recommendations. The analysis also helps to identify the most severe "tax and growth" obstacles.