Transcript Slide 1

Organisation for Economic Co-operation and Development
Taxation and Economic Growth
- where will the crisis take us?
Jens Lundsgaard
Deputy Chief Tax Economist – OECD – Centre for Tax Policy and Administration
[email protected], tel. +33 1 45248737
International Tax Conference
European Tax Systems Coordinated for Growth?
Confederation of Swedish Enterprise
Stockholm, 15-16 June 2009
Centre for Tax Policy and Administration
Public debt is rising rapidly
above historic norms
Public debt as % af BNP
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A challenge for OECD ministers
Truly, the need to restore sound public finances after the
crisis will present policymakers with tough trade-offs.
Considerable expenditure cuts or
additional revenue will be needed,
but the consolidation measures will have
to be designed in ways that do not hamper
the recovery and longer-run economic growth.
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Despite ”green shoots” economies
will be below full capacity for years
Output gap for the OECD area:
difference between actual and potential GDP
Restoring sound public finances
challenging with weaker potential growth
The deep recession is likely to weaken economic capacity:
 Weak investments and
capital destruction when sound companies go down
 Higher risk aversion may raise capital costs in the future
 Unemployment may become structural
Growth-enhancing structural reforms will be essential
to boost investment and make work pay
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Have taxes contributed to
excessive risk-taking and leverage?
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Have taxes contributed to
excessive risk-taking and leverage?
 Is tax system complexity – and tax havens – reducing
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financial market transparency?
Were tax systems nurturing the expansion of stock options
as executive remuneration?
Are tax systems favouring capital gains over income?
Corporate income taxes give advantage to debt over equity
finance – and this may be exploited internationally
A challenge for OECD ministers
The crisis has raised new questions about fairness and the
role of tax systems in achieving a fair sharing of the costs
and benefits of globalization.
The answers will be about redistributing in ways that
do not hold back job search, complicate business life or
weaken the economy’s ability to restructure.
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A case: Ireland
 Higher income taxation (raises over 2% of GDP):
• From 2009: Income Levy of 2% for gross income from € 15 000,
4% from € 75 000 and 6% from € 175 000
• The Health Levy doubled to 4% up to € 75 000 and 5% above that
 Personal income tax base is broadened (a bit)
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by reducing interest deductibility
Higher tax rates on capital gains and inheritance
VAT rate up from 20% to 21.5% and diesel and tobacco up
But! Corporate income tax maintained at 12.5% and
R&D tax credit increased from 20% to 25% of increment
A Commission on Taxation is to report later in 2009
Green tax reforms?
 Will the simultaneous fiscal problems and
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concern for climate and environmental challenges
create a wave towards higher green revenues?
With synchronised hikes in all countries
competitiveness concerns are less important
 OECD starts work on tax treatment of tradable
permits – meeting in Paris 16-17 September
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Summary
 Growth-oriented tax reforms will be important
to restructure and grow out stronger from crisis
 Raising sustainable revenues
 Concerns about social equity and fairness
 The need for sound policy advice is pertinent!
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