The OECD countries and partner economies are increasing corporate tax rates after two decades of reductions, the organization stated in a report released today.
In the “Tax Policy Reforms” report, the Organization for Economic Cooperation and Development (OECD) summarizes the fiscal measures introduced or announced by governments across 86 jurisdictions in 2024. The report focuses on OECD countries and some “partner” economies within the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting.
From this analysis, the OECD concludes that “in 2023 and 2024, more jurisdictions increased corporate income tax rates than reduced them, reversing the trend observed over the last two decades.”
“For the second consecutive year, increases in corporate tax rates were more common than reductions, suggesting further that the downward trend in corporate tax rates has halted or is showing signs of reversal. While the past two decades have seen a decline in corporate tax rates globally, 2023 and 2024 witnessed a reversal of this trend,” the OECD states.
Only three countries lowered corporate tax rates: Portugal, Austria, and Luxembourg.
In Portugal’s case, the OECD acknowledges the parliamentary approval of reducing the corporate tax rate from 21% to 20%, effective in 2025, as the new rate will apply to incomes from this year.
Conversely, five jurisdictions (Czech Republic, Iceland, Slovenia, Slovakia, and Lithuania) “implemented or introduced corporate tax rate increases in 2024 to generate additional revenue.” Three of these countries raised the rate “by at least two percentage points.”
The OECD notes that observed increases in rates “tended to be of greater magnitude than the reductions.”
Along with these rate changes, “several countries also introduced or increased additional taxes (or surcharges) on corporate income to boost general budget revenues, considering rising public expenditures, particularly in defense,” the OECD notes.
Despite the increase in rates, “measures aimed at reducing the tax base” for businesses continue to prevail, as countries adopt policies offering “preferential tax treatment for certain types of investments, particularly in research and development, emission-reducing technologies, and sectors deemed important for national security,” the OECD highlights.
Corporate tax rates remain at “historically low levels,” the OECD notes, based on a broader analysis of 143 jurisdictions. The average corporate tax rate “was 21.1% in 2024, far from the 28% recorded in 2000.”
“High levels of indebtedness, coupled with significant expenditure needs related to climate change, aging populations, and, in some countries, increased defense spending, have led jurisdictions at all income levels to adopt strategies for mobilizing more revenue,” the OECD states, referencing the global situation across various taxes.
The year 2024 solidified the trend of reducing fiscal support granted by states in response to the pandemic and the inflation crisis exacerbated by the war in Ukraine.
Regarding VAT, the use of exemptions or reduced rates remained widespread in 2024.
“Many jurisdictions expanded or prolonged VAT exemptions on essential goods and services — such as food, energy, health, housing, and childcare — mainly with the stated objective of addressing equity and cost-of-living issues,” the OECD states.
However, the OECD notes that several countries began to withdraw these supports “as inflationary pressures eased.”
