Editorial composite of representative financial paperwork and an archive photograph of HM Treasury in London

OECD finds tax reforms favor investment while budget pressures grow

Published: 15:01, September 8, 2026

Governments kept revenue-raising tax measures relatively limited in 2025 while offering incentives for investment, despite mounting pressure to fund public services and pay interest on debt, according to an OECD report covering reforms in 92 jurisdictions.

Published on September 8, Tax Policy Reforms 2026 describes countries pursuing increasingly different policies. Some made small adjustments after earlier reforms. Others introduced targeted tax breaks alongside higher charges on particular incomes, industries or products.

The review covers measures introduced or announced during 2025, including decisions with later start dates. It excludes the tax responses to the energy-price shock linked to the Middle East conflict in 2026.

Spending demands put pressure on tax receipts

The Organisation for Economic Co-operation and Development, a forum for international economic policy, says governments face competing demands. They want businesses to invest and households to retain spending power, but they also need money for pensions, public services, defense and interest on existing debt.

“Revenue collection is not keeping pace,” OECD Secretary-General Mathias Cormann said in the report’s release announcement. He called for targeted measures that raise revenue while protecting investment and living standards.

Public debt remained above pre-pandemic levels in most countries, the report says. Higher interest rates have also made servicing that debt more expensive in many OECD economies.

Those pressures extend beyond wealthy countries. Our earlier coverage examined how higher bond yields in advanced economies can increase borrowing costs for developing countries, leaving governments with less room to finance other spending.

Income-tax increases come alongside relief

Many personal income-tax measures intended to raise revenue focused on higher incomes or returns from assets. Other reforms reduced taxes for lower- and middle-income households, self-employed workers or people governments wanted to attract from abroad.

Britain provides one example of a targeted increase. Its 2025 Budget raised the ordinary and upper tax rates on dividends, payments companies make to shareholders, by two percentage points. The rates applying from April 6, 2026 are 10.75% and 35.75%, subject to allowances and exemptions. The additional rate remains 39.35%.

A government’s headline income-tax rate also tells only part of the story. Freezing tax thresholds while wages rise can bring more income into higher tax bands, even when the rates themselves remain unchanged. The report identifies this mechanism, known as fiscal drag, in several countries’ policies.

Social security contributions, payments that finance systems such as pensions and health insurance, continued to move toward higher rates or wider coverage. The OECD links that pattern to aging populations and the cost of social protection.

Business incentives coexist with targeted levies

The average combined corporate income-tax rate, including central and subnational taxes, was broadly stable for a third year. Governments nevertheless changed companies’ tax bills through deductions, credits and additional levies.

More countries used targeted taxes on banks and other profitable sectors, often temporarily. At the same time, investment incentives continued to favor research, emerging technologies and industries governments considered strategically important.

Germany illustrates the investment side. Under legislation approved in 2025, its corporation-tax rate is due to fall from 15% to 10% in annual one-percentage-point steps between 2028 and 2032. That rate excludes other business taxes, so it should not be read as a company’s total tax burden.

The country also introduced faster tax deductions for qualifying equipment investment. The government expects the package to encourage spending by businesses. Separately, we reported that Germany’s first-half 2026 deficit reached €71.3 billion as expenditure outpaced revenue. The deficit figures do 

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