Amid consecutive challenges and an uncertain macroeconomic outlook, policymakers have been navigating a complex landscape. They are tasked with generating additional domestic resources while also extending or enhancing tax relief to ease the cost-of-living crisis impacting households and businesses globally. This balancing act has led to a variety of strategies. On one hand, governments have reinforced and broadened their domestic tax bases, increased tax rates, or phased out existing relief measures. On the other hand, reforms have also focused on maintaining or expanding personal income tax relief for households, implementing temporary VAT reductions, or cutting environmentally related excise taxes.
A significant shift has occurred in business taxation, where the trend of corporate income tax (CIT) rate reductions appears to have come to a halt. In 2023, more jurisdictions raised CIT rates than reduced them, marking the first time this has happened since the inaugural edition of the Tax Policy Reforms report in 2015. As the global economy continues to recover, this shift reflects the need for additional revenues and a desire to promote greater equity within tax systems. With statutory tax rates at historic lows, countries aiming to offer favourable CIT treatment are increasingly opting for base-narrowing measures rather than further rate cuts.
At the same time, significant progress has been made in implementing the Global Minimum Tax (GMT) to establish a global floor for effective tax rates on large multinational enterprises (MNEs). By April 2024, 60 jurisdictions had publicly announced steps towards introducing or applying the GMT, with 36 planning to start in 2024, and some expecting legislation to take effect from 2025. Additionally, climate considerations are playing an increasingly prominent role in shaping tax incentives, with more jurisdictions adopting generous base-narrowing measures to encourage clean investments and support the transition to less carbon-intensive economies.
While personal income tax (PIT) cuts remain a key tool for supporting economic recovery and household incomes, an increasing number of jurisdictions in this report are implementing rises in social security contributions (SSCs). During the pandemic, PIT and SSC reforms were essential for providing households with tax relief. However, in the post-pandemic context—marked by demographic changes such as an ageing population, rising healthcare costs, and a greater need for social protection financing—there has been a growing trend towards broadening and increasing SSCs. PIT reforms have generally prioritised support for low- and middle-income households, with base-narrowing measures significantly outnumbering base-broadening initiatives.
Some countries also introduced progressive reforms, shifting the tax burden away from lower-income households, while three countries raised their top PIT rates. PIT base-broadening reforms were typically introduced either because the original reasons for tax relief had faded or due to the need for additional revenue to fund other government priorities. Meanwhile, reforms to capital income taxes have remained modest, continuing the trend from previous years.
The ongoing cost-of-living pressures have continued to drive jurisdictions to reduce taxes on energy consumption, a trend that began in 2022. However, despite these inflationary challenges, several high-income countries raised their carbon taxes in 2023 to further the transition to a low-carbon economy. As the year progressed, policymakers faced the challenge of shifting from broad support measures to more targeted responses, as the rising fiscal costs of these measures and their potential to weaken environmental incentives became clear. Consequently, in 2023, high-income countries generally focused on reducing excise tax rates while avoiding changes to their carbon tax rates.
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