Wednesday, September 27, 2023

The most developed countries are stopping corporate tax cuts to combat inflation

The OECD has noted a turnaround in countries’ tax policies with regard to corporate taxation. A report released this week finds that for the first time since 2015, countries have announced or legislated more increases in corporate tax rates than decreases. In addition, there is the introduction of new taxes on extraordinary profits.

However, the report from the organization, which covers developed economies, notes that “tax rates are at a minimum.” In fact, the average rate in the 114 jurisdictions studied by the OECD has risen from 28% to 20% in two decades.

While the change may be small, it marks the end of years of continuous cuts in the rates applied to corporate profits. And this coincided with the fiscal policies that governments have implemented in terms of taxing companies.

“The downward trend in statutory corporate tax rates is weakening,” said the report published on Wednesday. “Many jurisdictions introduced windfall taxes, duties or other measures on companies that earned windfall profits due to the economic consequences of large-scale Russian aggression against Ukraine, particularly in the energy sector,” the OECD adds.

However, the organization notes that there are still many countries that continue to apply tax incentives that, without affecting the tax rate applied to profits, help reduce tax payments by companies. However, as the OECD recognizes, some of these measures aim to promote the green transition of the economy towards more sustainable production models.

The OECD is therefore analyzing the regulatory trends of this tax throughout last year. However, it adds a section with survey data, yes, from 2020. In that sense, it points out that there is “a slight increase in both average tax income.” “Average corporate tax revenue as a percentage of GDP increased from 2.6% in 2000 to 3.0% in 2020,” he points out. However, he acknowledges that there are “significant” differences between countries.

According to the OECD, the revenue from extraordinary taxes for so-called windfall profits will play an important role in the trends of 2022. “Taxes, levies or other unexpected measures have been imposed on companies operating in the electricity and fossil fuel sectors, as well as in the financial and pharmaceutical sectors in some jurisdictions,” he notes.

The OECD also analyzes trends in other taxes. For example, it is noted that many countries continue to implement several VAT reductions, particularly to counter rising prices. However, as in the past, the agency is skeptical about the benefits of these measures. “A large body of empirical evidence suggests that these goals can be achieved more efficiently through alternative policy measures,” he emphasizes.

Finally, it is also about the development of property taxes. “More jurisdictions have turned to property tax reform to respond to growing pressure on governments to increase revenue, address housing affordability issues and combat inequality,” the OECD states in the report. “There has been a notable increase in reforms increasing taxes on net assets (both permanent and temporary) and taxes on recurring properties,” he adds, in contrast to the reductions made in Spain.

Nation World News Desk
Nation World News Desk
Nation World News is the fastest emerging news website covering all the latest news, world’s top stories, science news entertainment sports cricket’s latest discoveries, new technology gadgets, politics news, and more.
Latest news
Related news