More and more countries are hiking taxes to pay for increased public spending tied to healthcare and an ageing population, according to an Organisation for Economic Co-operation and Development (OECD) report published on Thursday.
In 2024, governments across 86 jurisdictions implemented reforms to “raise revenues for specific spending needs – most notably through measures aimed at funding current and future expenditures linked to population ageing,” the OECD said.
Overall, governments focused more on increasing taxes and specific tax supports during 2024, the OECD found. That was in contrast to previous years, when they tended to ease the tax burden on individuals and businesses during the pandemic and other economic shocks.
“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 report shows wider trends in tax and spending globally, and can highlight ideas percolating among policymakers that may not be operating in Ireland yet, but are likely to at least be noted within Government circles in the future.
It highlights a number of moves made by the Irish Government during 2024, including the increase in the vacant sites levy, as well as the removal of VAT on books and audiobooks. In contrast, Finland increased VAT on books from 10 per cent to 14 per cent, the OECD said.
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Overall, eight countries increased their VAT rate in 2024, the organisation found, in an “acceleration” of a trend that emerged in 2023.
“Health-related excise tax reforms continued gaining momentum as a tool for mobilising revenue and promoting healthier lifestyles, with many governments increasing taxes on tobacco, alcohol and sugar-sweetened beverages,” the Paris-based organisation added.
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“A move away from temporary fuel tax relief towards higher fuel excise taxes was also seen in 2024. Additionally, high-income countries strengthened carbon prices for the second year in a row, with several countries opting to increase their carbon tax rates or expand their scope to include new sectors.”
Despite the apparent move away from net zero emission targets in much of the industrialised world in recent months, the report shows how many countries used tax policy in ever wider ways to boost environmental-related policies last year.
A number of governments combined carbon pricing with targeted tax incentives, including, for example, reduced VAT rates on solar panels or heat pumps, personal income tax relief for sustainable transport, and corporate income tax incentives for clean investments.
It notes that Ireland extended the 0 per cent VAT rate on the supply and installation of solar panels for private dwellings to schools in January this year and reduced VAT on the sale and installation of heat pumps from 23 per cent to 9 per cent.