Taxation in Agriculture
This review of taxation in agriculture in 35 OECD countries and emerging economies outlines the diversity of tax provisions affecting agriculture, provides an overview of cross-country differences in tax policy, and confirms the widespread use of tax concessions specifically for agriculture, although their importance and modalities differ across tax areas and countries. Potential effects on innovation, productivity, and sustainability in the agricultural sector are also discussed.
Executive summary
Tax policy affects agricultural competitiveness through its impact on farm income levels and variability, investment in land and technology, labour and other input use, and the adoption of farm practices. For example, tax systems can incentivise farm investments by reducing taxable income through provisions for depreciation. In some countries, the tax system allows farmers to smooth income variations over time by using tax averaging. Taxes on income, property and land, and capital transfer may affect structural change, while differential tax rates on specific polluting activities, resources, or input use may affect sustainability.