Tax Reform: Restoring Growth

Newsletters 08/12/2010

Many governments face historic high levels of deficit and debt. To ensure sound public finances, they will need an appropriate balance between expenditure cuts and revenue increases. How additional revenues are raised is also important. OECD’s “Tax Policy Reform and Fiscal Consolidation” offers advice on how tax regimes can best support sustainable economic growth.These issues are further explored in two new Tax Policy Studies:

Tax Policy Study No. 19 details the rationale for tax breaks, asks whether they are still justified, and cites case studies such as VAT reduced rates and tax reliefs for house buyers. It notes that ”tax expenditures” are often entrenched in tax regimes and urges countries to evaluate whether they are worthwhile.

Tax Policy Study No. 20 recommends ways to make taxes less distortive and more growth-friendly. It also looks at the “political economy” of tax reform – why governments are able to design, legislate and implement growth-oriented tax reforms in some circumstances and not others and how to overcome obstacles.