Energy is a critical input into the production and consumption patterns that support economic and social wellbeing. However, many forms of energy use contribute to the environmental and climate challenges societies face today. Taxation is a key tool by which governments can influence energy use to contain its environmental impacts. This report provides a systematic analysis of the structure and level of energy taxes in OECD and selected other countries; together, they cover 80% of global energy use.
This report builds on the 2013 edition of Taxing Energy Use, expanding the geographic coverage of the 2013 data set to include Argentina, Brazil, China, India, Indonesia, Russia and South Africa. The report describes energy use, taxation and pricing in these countries and presents detailed graphical profiles of the structure of energy use and taxation for each.
The analysis reveals large differences in the taxation of energy across countries, although common patterns emerge. Transport taxes are considerably higher than in other sectors, where fuels that cause considerable harm for the environment and human health are often taxed at very low – or zero – rates. With few exceptions, countries' energy taxes do not harness the full power of taxes to reduce pollution and combat climate change.
The taxation of different sources and uses of energy (particularly those that give rise to emissions of greenhouse gases) will play a key role in governments’ efforts to mitigate the scale of global warming and climate change. At present, effective tax rates vary widely across different sources and uses of energy within countries, as well as across countries. This publication provides the first systematic statistics of such effective tax rates – on a comparable basis - for each OECD country, together with ‘maps’ that illustrate graphically the wide variations in tax rates per unit of energy or per tonne of CO2 emissions. These statistics and maps should be an invaluable tool for policymakers, analysts and researchers considering both domestic fiscal reform in response to climate change and other environmental challenges (e.g. to achieve emissions reductions targets most cost-effectively) and wider international responses.
Solving the world’s environmental problems could take a significant toll on economic growth if only today’s technologies are available. We know that innovation – the creation and adoption of new cleaner technologies and know-how – provides a means to achieve local and global environmental goals at significantly lower costs. Innovation is also a major driver of economic growth.
OECD governments are increasingly using environmentally related taxes because they are typically one of the most effective policy tools available. Exploring the relationship between environmentally related taxation and innovation is critical to understanding the full impacts of this policy instrument as well as one potential facet of “green growth.” By putting a price on pollution, do environmentally related taxes spur innovation? What types of innovation result? Does the design of the tax play a critical role? What is the effect of this innovation?
In analysing these questions, this report draws on case studies that cover Japan, Korea, Spain, Sweden, Switzerland, the United Kingdom, Israel and others. It covers a wide set of environmental issues and technologies, as well as the economic and policy contexts. The research methods range from econometric analysis to interviews with business owners and executives. The report also explores the use of environmentally related taxes in OECD countries and outlines considerations for policymakers when implementing these taxes.
Green growth policies can stimulate economic growth while preventing environmental degradation, biodiversity loss and unsustainable natural resource use. The results from this publication will contribute to the Green Growth Strategy being developed by the OECD as a practical policy package for governments to harness the potential of greener growth.
Small and medium sized enterprises (SMEs) are important for their contribution to employment, innovation, economic growth and diversity. This report examines the tax treatment of SMEs, the case for SME preferences, and the use of tax preferences and simplification measures for SMEs in thirty-nine OECD and G20 countries. It finds that many of the tax systems examined provide incentives to incorporate and to distribute income in certain types of capital form. Ideally, taxes should be neutral with regard to the business decisions of SMEs, including decisions related to their creation, form and growth. However, certain features of the tax system may disproportionately affect SMEs, for example, the asymmetric treatment of profits and losses, a bias toward debt over corporate equity, and the higher fixed costs of tax and regulatory compliance for small businesses. This report recommends that measures designed to address these concerns be carefully targeted to affected firms and seek to avoid introducing further distortions and complexity.
This report covers a broad range of SME taxation issues, including possible effects of taxation on the creation and growth of SMEs, and considerations arising from a relatively high compliance burden. Differing income tax and social security contribution burdens of unincorporated and incorporated SMEs are considered in detail, with analysis of average statutory tax rates carried out to investigate possible tax distortions to business creation and business structure decisions of a single worker/owner of an SME. Various arguments are presented for and against the targeting of tax incentives at SMEs. Country examples of SME tax incentives and compliance cost reduction measures are provided in the report.
This report provides a detailed review of the taxation of household savings in 40 OECD and partner countries. It examines the different approaches that countries take to taxing household savings, and calculates marginal effective tax rates on a wide range of savings vehicles (including bank accounts, bonds, shares, private pensions and housing) to assess the impact of these approaches on savings behaviour. It examines asset holdings across income and wealth distributions to help assess the distributional impact of savings taxation, and discusses recent changes in the exchange of information for tax purposes between tax administrations. It also draws out a range of implications from this analysis for savings tax policy as part of an inclusive growth tax agenda.
The past decade has witnessed a significant increase in cross-border capital flows and a pronounced shift in their composition towards portfolio investment, with much of the capital under management by mutual funds or "collective investment institutions" resident in OECD countries, as well as in offshore tax-free environments. These developments motivate countries to review and monitor the operation of their tax rules in this area, notably the interaction of domestic tax rules with tax systems and practices in other countries, to ensure that policy goals are being addressed.
This book analyses the taxation of cross-border portfolio investments by means of collective investment institutions. Possible tax distortions specific to the area of collective investment institutions are identified for a representative group of OECD countries. The analysis and calculations contained in the book, while illustrative and not capturing the full richness of the possible permutations under tax regimes, draw out key tax distortions, neutrality conditions and policy options.
This book investigates policy considerations in the taxation of capital gains of individuals and design features of capital gains tax systems. Perspectives on these are reported for 20 OECD countries. Descriptive information on aspects of capital tax rules for gains on domestic assets of resident investors are presented in summary tables covering all OECD countries.
This study catalogues the treatment of farmers within the tax and social security systems of a large number of OECD countries – knowledge of which has been very scarce up to now. The conceptual basis for deciding what constitutes a concession conferring financial benefit to the farmer is discussed and estimates of the values of those concessions are reported in the few cases where they have been found. Many different types of taxes are covered including income taxes, taxes on property, (annual or on transfer by death or sale), and taxes on goods and services, as is preferential treatment in social security contributions or entitlements. In all, twenty four countries are covered. The different measures are analysed from the point of view of their likely impact in distorting production and trade, and how they may affect structure and asset values in the sector. Finally, the report indicates that fuller integration of farming into economy-wide, social safety nets or tax systems could be more efficient, effective and equitable than sectoral approaches in tackling instability or low incomes in farming.
This Tax Policy Study on Taxation and Skills examines how tax policy can encourage skills development in OECD countries. This study also assesses the returns to tertiary and adult education and examines how these returns are shared between governments and students. The study builds indicators that examine incentives for individuals and governments to invest in education. These indicators take into account the various financial costs of skills investments for individuals such as foregone after-tax earnings and tuition fees, as well as whether investments are financed with savings or with student loans. Costs borne by governments such as grants, scholarships, lost taxes, and skills tax expenditures are also accounted for. The indicators also incorporate the returns to skills investments for individuals and governments through higher after-tax wages and higher tax revenues respectively.
This report provides a detailed review of the tax treatment of philanthropic entities and philanthropic giving in 40 OECD member and participating countries. The report first examines the various arguments for and against the provision of preferential tax treatment for philanthropy. It then reviews the tax treatment of philanthropic entities and giving in the 40 participating countries, in both a domestic and cross-border context. Drawing on this analysis, the report then highlights a range of potential tax policy options for countries to consider.
This publication examines the effects of taxation on employment, highlights the resulting policy challenges, and discusses the ways governments endeavour to address these challenges. Chapter 1 provides a broad overview of the effects of taxation on employment, examining how taxes on labour income can affect both the size of the labour force and the level of unemployment, and highlighting key areas of concern for tax policy makers. This analysis is then augmented in chapters 2-4 by the more detailed analysis of the effects of taxation on the employment of three groups where empirical research suggests that responses of labour supply to taxation may be relatively large: low-income workers, mobile highly-skilled workers, and older workers. As well as highlighting key areas of concern for tax policy makers, the report places a particular focus on the different measures that have been adopted by countries to attempt to overcome these problems, discussing, where possible, the main design features, and the advantages and disadvantages of the different approaches that have been adopted.
How should governments tax e-commerce? What does e-commerce mean for existing international tax principles and systems? What are the administrative challenges of taxing e-commerce, and how can these be tackled? How can governments harness the new technology to improve taxpayer service and reduce compliance costs? These are just some of the pressing questions addressed in this book.
This volume provides a comprehensive guide to the status of the OECD-led international work on these questions, and hence to emerging conclusions and recommendations across a wide span of tax policy and tax administration issues. It sets out the latest thinking of the OECD's Committee on Fiscal Affairs on the taxation aspects of electronic commerce, and on progress toward implementing the Ottawa Taxation Framework Conditions. It includes a number of documents for public review and comment, and details the outputs from the past two years' intensive dialogue with the international business community and with non-member economies. As such it is an invaluable reference for all those interested in how governments around the globe are responding to the taxation challenges presented by e-commerce.
This study draws on recent tax policy experience in a selection of OECD countries to provide an analysis of important current tax policy issues in a number of areas: corporate income tax; personal income tax and social security contributions; consumption tax; property and wealth taxes; devolving expenditure and taxing power; tax administration and enforcement.
Taxation is inevitable in modern economies to finance public spending, which is aimed at meeting fundamental economic and social objectives. However, efficiency losses associated with taxation need to be taken into account when the cost and benefits of public expenditure to be funded are being assessed. The public perception of the fairness of tax systems, the practical enforceability of tax rules and the cost arising from compliance are other important considerations.
Against this backdrop, the OECD has reviewed in the past two years the tax systems of a number of Member countries in its periodical Economic Surveys. The analysis and policy recommendations emerging from these reviews may provide some useful lessons for other OECD countries, and these are pulled together in this paper.
Tax revenues provide governments with funds to invest in development, relieve poverty, deliver public services and build the physical and social infrastructure for long-term growth. Moreover, there are mutually beneficial links between taxation and good governance. Tax and Development: Aid Modalities for Strengthening Tax Systems highlights how taxation can have a positive effect on the quality of governance and a government’s relationship with citizens and, in turn, how good governance can have a positive effect on compliance and revenue mobilisation.
How can international assistance providers, including OECD members, international and regional organisations, support the development of tax systems in developing countries? Tax and Development: Aid Modalities for Strengthening Tax Systems provides practical guidance for policy makers and practitioners based on the results of an extensive literature review, a survey of aid agency officials and six country case studies (Ghana, Guatemala, Liberia, Mali, Mozambique, and Tanzania). It examines the aid instruments that donors use to assist developing countries including general and sector budget support, basket financing, stand-alone bilateral aid and funding South-South organisations. The strengths and weaknesses of each modality for supporting tax systems are identified, and some 50 recommendations to support the development of effective, efficient and growth-oriented tax systems in developing countries are provided.
Tax sparing provisions have now more than four decades of history in bilateral tax treaties, including treaties between OECD countries. But the world of today is quite different from that when the positions of OECD Member and non-member countries towards tax sparing were developed. These changes in the international setting have led countries to reconsider their attitude towards tax sparing and the design of such provisions. This report examines the practices of Member countries and explains why Member countries have become more reluctant to grant tax sparing in treaties. It also provides a number of suggested "best practices" on the design of tax sparing provisions in tax treaties.
This report investigates how tax revenue from transport fuels could evolve over time as vehicles rely less on fossil fuels, with a focus on the case study of the Republic of Slovenia. Reducing the reliance on fossil fuels in the transport sector is a welcome development from the perspective of its climate and health impacts and of reduced energy dependence. However, under current settings, reduced fuel use will also lead to a loss of tax revenues, which may put stress on government budgets. Based on simulations for Slovenia, with a 2050 horizon, the report provides an in-depth assessment of the taxation of road transport and investigates how tax policy could adapt to declining fossil fuel use in the long term if the objective is to maintain revenues at current levels while taking fairness and efficiency considerations into account. It finds that gradual tax reforms, with an evolving mix of taxes, shifting from taxes on fuel to taxes on distances driven, can contribute to more sustainable tax policy over the long term.
Tax ratios derived using aggregate data - also known as implicit tax rates - have attracted increased attention from policymakers and analysts as a possible approach to measuring average effective tax rates on labour, capital, households, corporations and consumption. This study reports on conceptual and practical difficulties encountered in the measurement of average tax rates using aggregate data (e.g., National Accounts and Revenue Statistics).
To examine the robustness of previous studies on tax ratios, the existing indicators are re-calculated for an expanded sample of countries and over an extended time period, and the results are compared with those derived under an alternative suggested methodology. The work finds that most tax ratios reported in the literature suffer from a number of flaws, and highlights measurement problems that are much broader than discussed in the literature. The identification of substantial shortcomings with these measures is useful, given the interest in their use for policy purposes. The message of this study is that policymakers should be aware of the measurement problems underlying average tax rates based on aggregate data, should they be fielded to shape public policy debates.
Although men and women are typically taxed under the same rules, their different social and economic characteristics (e.g. income levels or labour force participation) mean that the tax system can inadvertently contribute to gender inequalities in society. Understanding and improving the impact of taxes on gender equality is a key dimension that governments need to consider as part of tax design to support inclusive growth. This report provides the first cross-country overview of governments' approaches to tax policy and gender, including reforms undertaken to date and potential areas of explicit and implicit gender bias. Covering 43 countries, it also explores the extent to which governments take into account gender implications in policy development, gender considerations in tax administration and compliance, and the availability and use of gender-disaggregated data. Finally, it also discusses priorities for further work on tax policy and gender issues.
This is the first edition of "Tax Policy Reforms in the OECD". This annual series of reports aims to track and compare tax policy developments over time across OECD countries. This year’s edition focuses on the tax reforms that were introduced in 2015 and identifies the most significant tax policy reforms as well as common tax policy trends across groups of countries. The Report is primarily based on responses to the OECD Tax Policy Reform Questionnaire which is sent yearly to all member countries to collect information on tax reforms and their expected revenue effects. Monitoring tax policy reforms across the OECD and understanding the context in which they were undertaken is crucial to inform tax policy discussions but also to support member and non-member countries in their assessment and design of future tax reforms.