OECD countries are holding off on tax cuts for companies to fight inflation

The OECD found a change in the trend in countries’ tax policies regarding corporate taxation. A report released this week said that for the first time since 2015, states announced or enacted more increases in corporate tax rates than cuts. Added to this is the imposition of new taxes on windfall profits.

The organization’s report, which covers developed economies, noted that “tax rates are minimal.” In fact, across the 114 jurisdictions studied by the OECD, the average rose from 28% to 20% over two decades.

While the change may be small, it marks the end of years of continuous declines in the rates applied to the company’s profits. And this has coincided with the fiscal policies that governments have been pursuing to tax companies.

“The downward trend in statutory corporate income tax rates is moderate,” explains the report released this Wednesday. “Many jurisdictions have introduced windfall taxes, levies or other measures on companies generating windfall profits due to the economic consequences of Russia’s large-scale aggression against Ukraine, particularly in the energy sector,” the OECD adds.

However, the organization finds that there are still many countries that continue to use tax breaks that help companies reduce taxes without affecting the rate of profit. However, the OECD recognizes that some of these measures are aimed at encouraging the economy’s ecological transition to more sustainable production models.

Thus, the OECD analyzes the regulatory trends of this tax over the past year. However, it does add a section with collection data, yes, from 2020. In this sense, it indicates that there is a “small increase in both average tax revenues”. “Average corporate tax revenue as a percentage of GDP has increased from 2.6% in 2000 to 3.0% in 2020,” he notes. However, he admits there are “significant” differences between countries.

The OECD notes that an important role in the 2022 trends is the appearance of extraordinary taxes, known as windfalls. “Taxes, levies or other surprise measures have been imposed on companies operating in the electricity and fossil fuel sectors, as well as the financial and pharmaceutical sectors in some jurisdictions,” he notes.

The OECD also analyzes other tax trends. For example, it finds that many countries continue to make multiple cuts in VAT, especially to deal with rising prices. However, the agency, as it has done in the past, is skeptical about the usefulness of these measures. “A large body of empirical evidence suggests that these goals can be more effectively achieved through alternative policy measures,” he emphasizes.

Finally, it also addresses the evolution of property taxes. “A growing number of jurisdictions have pursued property tax reforms in response to growing pressure on governments to raise revenues, address housing affordability and combat inequality,” the OECD report notes. “There is an increase in reforms that increase taxes on net worth (both permanent and temporary) and taxes on recurring real estate,” he adds, in contrast to the reductions in Spain.

Source: El Diario





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