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 

Christian Nordqvist Avatar

Other News

EU poverty study finds progress alongside persistent national gaps

Oct 1, 2026

AI job skills are expanding alongside demand for technical expertise

Oct 1, 2026

Digi agrees $130 million deal for sensor maker Disruptive Technologies

Oct 1, 2026

UK late-payment bill would cap terms and strengthen suppliers’ rights

Sep 30, 2026

Sumitomo completes battery-recycling plants designed to recover four metals

Sep 30, 2026

Smarter controls could make room for 330 GW on existing power grids

Sep 30, 2026

Biosimilars cut into Humira sales and offer savings on costly medicines

Sep 30, 2026

Global wealth hit a record, but much of the gain was on paper, MGI says

Sep 29, 2026

Progress closes $400 million Domo deal to add AI data platform

Sep 29, 2026

SOCAR and Comstock set a $1.65 billion framework for Haynesville gas investment

Sep 28, 2026

HCLSoftware plans Robotiq.ai deal to connect AI agents with older business systems

Sep 28, 2026

ONS research says payroll records could sharpen the UK labor market picture

Sep 28, 2026

Select Water agrees $700 million deal for Pilot Water’s oilfield network

Sep 27, 2026

US firms are pulling back investment in China, Federal Reserve analysis finds

Sep 26, 2026

NetApp plans PEAK:AIO acquisition to scale storage for larger AI clusters

Sep 26, 2026

Bank AI use was linked to a smaller share of small-business lending, Fed study finds

Sep 26, 2026

Iridium shareholders approve Rocket Lab takeover: what still has to happen

Sep 25, 2026

Akamai’s 11.6 billion dollar Anthropic deal ties cloud revenue to a 5.5 billion dollar buildout

Sep 25, 2026

Bentley completes 350 million pound Crewe investment as it unveils its first electric vehicle

Sep 25, 2026

Falling birth rates did not reduce total output in historical data, NBER study finds

Sep 25, 2026