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Tax systems drive inclusive growth, says OECD


How does one design economic growth?

If you ask the OECD, the answer is tax policy. According to new research, governments should use tax systems to drive forward economic agendas.

“Tax policy has a clear role to play in helping achieve strong, sustainable and balanced growth,” said OECD Secretary-General Angel Gurría.

Tax Design for Inclusive Economic Growth examines how tax systems can support growth, as well as address distributional concerns.

Gurría believes the research can become part of a new tax policy contribution to the G20 agenda.

Released Wednesday, the research is expected to be a topic of discussion during a ministerial-level G20 Tax Symposium on July 23 in Chengdu, China, prior to the meeting of the G20 finance ministers and central bank governors July 23-24.

The symposium will offer G20 finance ministers and high-level policymakers the opportunity to discuss how to better use tax policy tools to drive forward the inclusive, pro-growth agenda while providing businesses with greater tax certainty, to promote trade and investment.

The OECD has broken down tax policy design options into four broad categories:

  1. broaden tax bases and remove tax expenditures not well-targeted at redistributive goals;
  2. progress tax systems beyond personal income tax and take into account the overall progressivity of the tax and benefit system;
  3. identify pre-tax behaviours and opportunities, including those that induce individuals to develop and optimally build up and use human capital and skills; and
  4. enhance tax policy and administration, bringing workers from informal sectors into the tax network.

The OECD adds further analysis should be done to identify what tax reforms stimulate inclusive growth, and what do not. Future research should also examine how tax reforms will interact with a country’s existing tax policy setting, its level of inequality and its stage of development.

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Michael Sutherland-Shaw

Michael Sutherland-Shaw

Marketing Communications Specialist at FreeBalance
Michael works in the marketing and communications department following a career in journalism. Michael is currently learning Ruby on Rails and loves discovering new music.

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