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Taxation and Skills

image of Taxation and Skills

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.

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Executive summary

Ensuring that all individuals can develop the skills needed to productively participate in the economy is necessary for inclusive economic growth. Investing in skills can expand the productive capacity of the economy and at the same time reduce inequality by ensuring that all members of society have the opportunity to fulfil their productive and creative potential. Improving the level of skills across the economy has positive impacts for individuals and society as a whole. For many individuals, human capital represents the most valuable asset they will possess in their lifetime.

English

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