HIGHLIGHTS

Tax Policy Reforms 2020

The role of tax systems in responding to COVID-19
This document and any map included herein are without
prejudice to the status of or sovereignty over any territory, to
the delimitation of international frontiers and boundaries and
to the name of any territory, city or area.

The OECD freely authorises the use of this material for non-
commercial purposes, provided that suitable acknowledgment
of the source and copyright owner is given. All requests for
commercial uses of this material or for translation rights should
be submitted to [email protected].

The use of this work, whether digital or print, is governed by the

Terms and Conditions to be found at
www.oecd.org/termsandconditions.

Image credits: © Shutterstock/2p2play

© OECD 2020
 HIGHLIGHTS
Tax Policy Reforms 2020
The role of tax systems in responding to COVID-19
Click or tap here to enter text. | 2

Editorial
subsequent waves of infections. While
some degree of stability is usually needed
to strengthen confidence, given the
uncertainty of the current crisis, policy
flexibility and agility may be what is needed
to help restore confidence.
The outbreak of COVID-19 has resulted
in a health crisis and a drop in Governments should continue to use
economic activity that are without fiscal tools to provide support to
precedent in recent history. Containing affected businesses and households.
and mitigating the spread of the virus has Support measures should be kept in place
rightly been the first priority of public as long as needed to avoid scarring effects
authorities to reduce the incidence of the and fiscal policy should remain supportive
disease and limit the pressure on to speed up recovery. That said,
healthcare systems. governments should make sure that policy
responses are adapted: measures should
Most countries have also acted rapidly be well targeted and slowly withdrawn
and forcefully to limit the economic when the situation improves.
hardship caused by lockdowns and
other containment measures. While the Once recovery is locked in,
size of fiscal packages has varied across governments should shift from crisis
countries, most have been significant, and management to consideration of
some countries have taken unprecedented structural reforms, but they must be
action. Initial government responses careful not to act prematurely as this
focused on providing income support to could jeopardise recovery.
households and liquidity to businesses to Governments should seize the opportunity
help them stay afloat. As the crisis has to build a greener, more inclusive and
continued, many countries have expanded more resilient economy. Rather than
their initial fiscal packages. Where simply returning to business as usual, the
lockdowns and other containment goal should be to “build back better” and
measures have been eased, a number of address some of the structural
expansionary fiscal policy measures have weaknesses that the crisis has laid bare.
been implemented or announced to A central priority should be to
support economic recovery. accelerate environmental tax reform.
Uncertainty looms large, however, and Today, taxes on polluting fuels are
continued policy adaptability will be nowhere near the levels needed to
key. There is already evidence that the encourage a shift towards clean energy.
recovery will not be a smooth process, with Seventy percent of energy-related
localised re-introductions of lockdowns in CO2 emissions from advanced and
some countries, continued movement emerging economies are entirely untaxed
restrictions and risks of second and and some of the most polluting fuels

HIGHLIGHTS: TAX POLICY REFORMS © 2020 | 2

 HIGHLIGHTS
Tax Policy Reforms 2020
The role of tax systems in responding to COVID-19
Click or tap here to enter text. | 3

remain among the least taxed. Adjusting as increased demands for fair burden
taxes, along with state subsidies and sharing should provide new impetus for
investment, will be unavoidable to curb reaching an agreement on digital taxation.
carbon emissions. Tax co-operation will be even more
necessary to prevent tax disputes from
Fair burden sharing will also be central turning into trade wars, which would harm
going forward. The crisis has shed light recovery at a time when the global
on and exacerbated existing economy can least afford it.
inequalities. Low-income earners,
women and young people have been hit
harder, while part-time, temporary and
self-employed workers have accounted for
up to half of the workforce in the most
severely affected sectors. A number of
countries have temporarily expanded sick
leave or unemployment benefits to non-
standard workers, but consideration
should be given to strengthening their Pascal Saint-Amans, Director
social protection in the longer run. OECD Centre for Tax Policy and
Once countries exit the crisis and Administration
economies recover, governments will
start looking to restore public finances,
but they may not be able to resort to
traditional revenue-raising recipes.
Raising taxes on labour and consumption,
as was done in the wake of the 2008 global
financial crisis, may be difficult politically
and in many cases not desirable from an
equity perspective. Governments will need
to find alternative sources of revenues.
The taxation of property and personal
capital income will have an important role
to play, particularly in a context of
significant improvements in international
tax transparency.
Global cooperation is more important
than ever. The crisis has highlighted our
collective vulnerability, but also the critical
importance of multilateral collaboration.
Rising pressure on public finances as well

HIGHLIGHTS: TAX POLICY REFORMS © 2020 | 3

 HIGHLIGHTS
Tax Policy Reforms 2020
The role of tax systems in responding to COVID-19
Click or tap here to enter text. | 4

Executive
member of the OECD after the primary
data collection exercise had been
completed), as well as Argentina, China,

Summary
Indonesia and South Africa. The intention
is to continue expanding the coverage of
the report to additional G20 countries.
In its assessment of the reforms
adopted before the COVID-19 crisis,
Tax Policy Reforms: OECD and and due to come into force in the
Selected Partner Economies is second half of 2019 and 2020, the report
an annual publication that provides identifies a number of common tax
comparative information on tax reforms reform trends across countries. It
across countries. It tracks tax policy should be noted that these are trends that
developments over time and gives an emerged before the COVID-19 crisis and
overview of the latest tax reform that reforms have in some cases been
trends. This year’s edition focuses on the delayed in response to the crisis. More
tax reforms that came into force or were generally, the COVID-19 crisis should be
due to come into force in the second half seen as a significant intervening event and
of 2019 and 2020. However, given the future reports will focus on the impact of
significant packages of measures that the crisis on these longer-term trends.
were introduced in the first half of 2020 in Looking at the reforms adopted before the
response to the COVID-19 crisis, the COVID-19 crisis, the report identifies the
report also includes a Special Feature on following trends:
“Tax and Fiscal Policy Responses to the
COVID-19 Crisis”. This Special Feature ► Personal income tax (PIT)
takes stock of the tax and broader fiscal reductions, targeted in particular at
low and middle-income households,
measures introduced by countries from the
have continued. While this trend
beginning of the virus outbreak up to mid-
represents a broad continuation of PIT
June 2020, largely based on countries’
reforms in recent years, an
updates to the database compiled by the
intensification of PIT rate cuts has been
OECD on tax and fiscal policy responses
observed. PIT base narrowing
to the crisis.
measures, often targeted at families
This year also marks the first time that and low-income earners, have also
China is included in the publication. been frequent. Regarding the taxation
This year’s report covers 40 countries of household capital income, limited
including all OECD countries (with the changes have been introduced,
exception of Colombia 1, which became a involving both tax increases and

1
Colombia is included in the Special Feature, but not
in the other chapters of the report.

HIGHLIGHTS: TAX POLICY REFORMS © 2020 | 4

 HIGHLIGHTS
Tax Policy Reforms 2020
The role of tax systems in responding to COVID-19
Click or tap here to enter text. | 5

decreases. These measures have certain revenues from digital services

included changes to the taxation of in the meantime.
rental income as well as expanded tax
reliefs to support small savers. ► The stabilisation of standard value-
added tax (VAT) rates observed in
► Changes to social security recent years is continuing, while
contributions (SSCs) have been VAT base changes have involved a
limited both in number and in scope. mix of base broadening and base
Most of the reforms were aimed at narrowing measures. High standard
lowering SSCs, but changes were VAT rates in many countries have
generally modest. This confirms that limited the room for additional rate
the pace of reform in this area has increases. Instead, many countries
slowed. have concentrated their efforts on the
fight against VAT fraud and on
► Corporate income tax (CIT) rate cuts ensuring the effective taxation of cross-
have continued in 2020. As was the border online sales to raise additional
case last year, the most significant CIT revenues and strengthen the
rate reductions have generally been functioning of their VAT systems. On
introduced in countries with higher the other hand, an increasing number
initial CIT rates, leading to further of countries have narrowed their VAT
convergence in statutory CIT rates bases by expanding the scope of their
across countries. Many countries have reduced VAT rates, which suggests a
also reinforced the generosity of their slight departure from trends in previous
corporate tax incentives to stimulate years, where the predominant objective
investment, innovation and of VAT reforms was to raise additional
environmental sustainability. revenues. A number of countries have
► With regard to international taxation, also raised their excise taxes, in
efforts to protect CIT bases against particular on tobacco products and
corporate tax avoidance have sugar-sweetened beverages, in line
continued with the adoption of with trends in previous years.
significant reforms in line with the ► Environmentally related tax reforms
OECD/G20 Base Erosion and Profit have continued at a slow pace in
Shifting (BEPS) project. The tax 2020. While the number of measures
challenges arising from the adopted increased compared to 2019,
digitalisation of the economy continue reforms were concentrated in a few
to represent a major concern for many countries and their scope remained
countries. Efforts to achieve a generally limited. Most of the reforms
consensus-based multilateral solution were related to the taxation of energy
to address those challenges are use, but unlike in previous years,
ongoing, but a growing number of transport fuels were not the main focus.
countries have announced or Instead, changes were made to carbon
implemented interim measures to tax taxes and taxes on electricity

HIGHLIGHTS: TAX POLICY REFORMS © 2020 | 5

 HIGHLIGHTS
Tax Policy Reforms 2020
The role of tax systems in responding to COVID-19
Click or tap here to enter text. | 6

consumption. Tax reforms in the reforms that were due to come into force.
transport sector, aside from energy The most recent measures and
use, were limited to adjustments to discussions suggest that the recovery
vehicle registration taxes and tax phase will be supported by expansionary
reductions for vehicles running on fiscal policy in many countries, including
alternative fuels. There was an through measures to support investment
increase in reforms related to other and consumption and ongoing support for
environmental tax bases (e.g. plastic households and businesses.
and waste), but their overall number
remained limited. The report contains four chapters.
Chapter 1 discusses the macroeconomic
► There has been an increased focus background before the COVID-19 crisis,
on property taxation compared to and provides a brief overview of the impact
previous years. Previous editions of of the crisis on the global economy.
this report have generally shown Chapter 2 presents the latest trends in tax
limited changes to property taxes. This revenues and tax mixes. Chapter 3 gives
year marks a change, with an an overview of the tax reforms entering
increasing number of reforms in this into force or due to enter into force in the
area. In addition, while previous years second half of 2019 and 2020. Finally,
saw a mix of tax increases and Chapter 4 provides an overview of the
decreases, this year shows a clearer measures adopted by countries so far in
trend towards increases in property response to the COVID-19 crisis, in the
taxation. Special Feature on “Tax and Fiscal Policy
The Special Feature on “Tax and Fiscal Responses to the COVID-19 Crisis”. The
Policy Responses to the COVID-19 Special Feature in this year’s report
Crisis” shows that countries have taken focuses mainly on the emergency
swift and significant policy action in measures announced in response to the
response to the crisis. While the size of crisis. However, the significant increases
fiscal packages has varied across in government expenditure and the
countries, most have been significant, and expected dramatic decline in tax revenues
some countries have taken unprecedented in the aftermath of widespread economic
action. The initial measures introduced by lockdowns are likely to present a large
countries focused on keeping businesses range of medium to longer-term fiscal
and households afloat, mainly through challenges. In responding to these
liquidity support for businesses, job challenges, tax policy will be one of the key
retention schemes, and income support to instruments to be relied upon by policy
households. As the crisis has continued, makers. Against this backdrop, ongoing
many countries have expanded their initial developments in tax policy in this rapidly
response packages. Some countries have evolving environment will be monitored
also decided to adjust some of their initial and assessed in future editions of this
measures or to wind back or delay tax report.

HIGHLIGHTS: TAX POLICY REFORMS © 2020 | 6

FURTHER READING

OECD (2020), OECD Secretary General's Report to Ministers 2020, OECD,

Paris. http://issuu.com/oecd.publishing/docs/oecd_secretary-
general_s_report_to_ministers_2020_/112.

OECD (2020), Tax Policy Reforms 2020: OECD and Selected Partner
Economies, OECD Publishing, Paris, https://doi.org/10.1787/7af51916-
en.

OECD (2020), Database on tax policy measures taken in response to COVID-

19, http://www.oecd.org/tax/covid-19-tax-policy-and-other-
measures.xlsm.

OECD (2020), Tax and Fiscal Policy in Response to the Coronavirus Crisis:
Strengthening Confidence and Resilience, OECD, Paris.
https://read.oecd-ilibrary.org/view/?ref=128_128575-
o6raktc0aa&title=Tax-and-Fiscal-Policy-in-Response-to-the-
Coronavirus-Crisis.

Tackling Coronavirus (COVID-19), Contributing to a global effort at

http://www.oecd.org/coronavirus.
For more information:

[email protected]

http://oe.cd/taxpolicyreforms

@OECDtax #TPR2020