OECD report finds global shift towards revenue raising as fiscal pressures grow

A newly-released OECD report spanning 86 jurisdictions found that, in 2024, many countries were focused on raising tax revenue and moving away from broad pandemic-era tax relief measures.

“Tax policies served as a stabilising tool to protect households and sustain demand in the wake of recent shocks,” OECD secretary-general Mathias Cormann said.

“Governments are now introducing tax reforms to rebalance public finances, a welcome step to ensure fiscal sustainability, prepare for future challenges and adapt to long term structural transformations.”

The OECD report found that high levels of debt and growing spending pressures related to climate change, population ageing and defence had spurred tax hikes across many jurisdictions.

“High levels of debt coupled with significant emerging spending needs relating to climate change, ageing and, in some countries, increased defence spending, has meant that jurisdictions of all income levels have adopted strategies to mobilise more revenues,” the report said.

“Some have opted to raise standard value added tax (VAT), corporate income tax (CIT), or personal income tax (PIT) rates, as well as health and environmentally related taxes. Others have pursued more targeted approaches to increase tax revenues, including the introduction of temporary or permanent excess profit taxes or surtaxes.”

In 2024, many countries continued to move away from broad tax relief measures enacted during the pandemic and post-pandemic period of high inflation, the report found. Many jurisdictions continued to scale back temporary VAT rate cuts as inflationary pressures eased, while others increased their VAT rates.

At the same time, there was an emerging trend towards personal income tax relief to offset the effects of population ageing.

Governments were increasingly using the tax system to incentivise and disincentivise certain consumer choices, the OECD found. Health-related taxes, including those on tobacco, alcohol and sugar-sweetened beverages, gained momentum in 2024.

High-income countries also strengthened carbon prices for the second year in a row, with several increasing their carbon tax rates and expanding their scope. At the same time, the OECD observed a shift away from pandemic-era fuel tax relief, with higher fuel excise taxes.

The report also identified signs that a previously observed downward trend in the company income tax rate was starting to reverse, with more jurisdictions increasing CIT rates than reducing them for the second consecutive year.

“While many governments continued to prioritise support for investment, there was a notable pivot towards revenue mobilisation, particularly through rate increases,” the report said.

At the same time, many governments continued to offer targeted tax incentives for investments, particularly in research and development, clean technologies and strategic sectors.

Broadly, the report found that many jurisdictions were pivoting away from the pandemic era of broad tax relief, and governments were focused on raising revenue in the wake of growing fiscal pressures.

“With 2023 marking a turning point away from the broad tax relief measures seen during the pandemic and the subsequent period of inflation, this trend solidified in 2024 with a mix of rate increases and targeted tax support across all major tax types,” the report said.