Taxation in Agriculture

Chapter 3. Conclusions and next steps

Abstract

This chapter outlines the wide range of tax rates, as well as the diversity and frequency of concessions in agriculture found across the reviewed countries. It briefly discusses the likely effects of tax systems and concessions for agriculture on the performance of the sector. Finally, it points to the need to improve understanding of the direct and indirect effects of tax provisions on agriculture and to evaluate the impact of tax policy on agriculture on a more regular basis.

The underlying motivation behind this review of taxation in agriculture was to improve the evidence base regarding the impact of various tax policies on the main drivers of agricultural productivity and sustainability – innovation, structural change, natural resource use and climate change. To that end, this review compiled information on taxation in agriculture for 32 OECD countries, as well as Colombia, Costa Rica and Croatia. It also examines the literature reporting the results of both ex ante analysis of the impact of tax provisions on agriculture, and ex post evaluations of policies actually implemented by countries.

Based on a typology of concessions developed in 2005 (OECD, 2005[1]), different kinds of taxes and differential tax treatments are considered, mainly for taxes on income, profits and capital gains; taxes on property including agricultural land, and property transfer; taxes on goods and services and fuels; environmental taxes and related concessions in agriculture; and tax incentives for R&D and innovation, as well as the uptake of these incentives by the agricultural sector. Social contributions were included in the questionnaire, but cross-country comparison was found to be difficult to interpret given the diversity of policy frameworks and the unequal reporting of respondent countries.

The value of this study has been to document current concessions according to established typologies, investigate how taxation regimes with respect to agriculture have evolved since the early-2000s, and include more countries than in the 2005 study (OECD, 2005[1]). To the extent possible, this study also considers tax concessions in the context of general tax rates applied in the economy. One might expect that more generous concessions would be available in countries where general taxation is high, but this is not always the case.

The overview of tax systems across countries outlines the wide range of tax rates and the diversity of concessions in agriculture. It also points to tax types where concessions are most frequent. However, a comparative analysis of these regimes is complicated by the fact that some of the observed measures are not viewed as agricultural concessions in some countries, as the same treatment is available for non-farm households. Whether they are agriculture-specific or not, these tax concessions may have implications for agricultural productivity and sustainability, and their potential effects need to be assessed and compared with the impact of alternative options for meeting policy objectives. Even in the absence of sector-specific concessions, taxation affects farmers’ decisions and farm household income. For example, in most countries income taxation is progressive and potentially reduces the frequency of low incomes across farm households.

The usage of tax concessions for the agricultural sector is widespread in countries covered in this report. In fact, some form of differential treatment to the sector is available in each country examined here. Some concessions are widespread and commonplace for individual farms. They include exempting small farmers from paying taxes, allowing cash-based accounting, providing estimates of taxable income (thereby eliminating the need to keep accounts), reducing annual land and property taxes, reducing the taxes associated with the transfer of land between generations, exempting farmers from being registered for value added taxes, and offering tax concessions for fuel used in agricultural production. Most countries offer tax concessions on personal income from farming, in particular for smaller farms, but concessions for corporate income and capital gains are less frequent. Agricultural goods (outputs and inputs including pesticides and fertilisers) also benefit from reduced taxation in almost all countries reviewed, as does fuel used in agriculture – a cost-reduction policy measure with potentially negative environmental effects.

At the farm level there are fewer concessions offered by countries that tend to treat agriculture like any other sector, although agricultural land taxation is an exception. In other countries, tax provisions are increasingly used to help farmers (and sometimes other firms) manage risks, and there is evidence that these actually help reduce year to year income variability.

It is also clear that progressive tax systems and income tax concessions for agriculture improve the income situation of farm households, thus reduce the frequency of low incomes. Poverty resulting from low income farms could, however, be more effectively addressed using the general social security system. This would require that all of a household’s actual income is known, however, and as noted in OECD (2005[1]), many farmers fall outside of the tax system altogether in some countries due to sector-specific exemptions. Furthermore, it is generally observed that households supplement farm income with income from other sources. This is another argument for actual income from all activities being registered via the tax system. Another argument against using the tax system to reduce poverty is that it is unable to reach poor farm households with income levels below the tax threshold.

While some features of the tax system may facilitate farmland transfers and the transmission of farm assets between generations, the ability of households with comfortable income levels to offset farm losses against off-farm income may have a negative effect on the productivity (and sustainability) of the sector as a whole.

Most countries also use tax incentives to support investment in R&D and innovation, which are generally not agriculture-specific. Many countries reflected that there was a low uptake of available R&D tax credits by the agricultural sector. However, agriculture increasingly benefit from innovation in other sectors. Whether R&D is agriculture-specific or not, farms can benefit indirectly, in so far as they adopt the innovations created by firms using this type of support.

At the same time, the current review of tax systems and concessions offers few conclusions in the area of policy effectiveness. Each of these concessions was ostensibly put in place with a clear policy goal in mind (in many cases years ago), but with the exception of policies in the sustainability space, there is extremely thin publicly available evidence that the concessions have achieved their intended objectives. It is clear that once these policies are in place, removing them is extremely difficult in a political sense.

Furthermore, these policies have very real costs to countries in terms of foregone revenue. As such, it is completely in the realm of possibility that even in the case that a policy were to be effective in achieving its objective, the cost-effectiveness of the scheme may be unknown – that is, it remains to be seen whether or not the same objective could have been achieved more cheaply using a different policy instrument.

Finally, these policies undoubtedly have knock-on effects, which remain almost totally uninvestigated. Knock-on effects include: increases in greenhouse gas emissions from relatively cheaper fuel for agricultural activities; the increased use of pesticides and fertilisers due to discounted value added taxes; the capitalisation of tax concessions into land values; and the incentives to purchase farmland for inheritance planning purposes or tax off-setting. The latter incentives may lead farmers, in particular those with comfortable off-farm incomes, to run annual farm losses to reduce their income tax, and accumulate wealth from rising land values, while benefiting from lower taxed capital gains. Thus farm tax provisions may decrease incentives to optimise the productive use of farm assets, leading to lower sectoral productivity and reduced output, reduced demand for farm inputs and services, and lower rural employment.

The documentation of policies contained in this review provides a useful starting point for further analysis on these issues of policy effectiveness, cost-effectiveness, and secondary impacts – particularly with respect to how these policies drive changes in agricultural productivity and sustainability. However, further investigation is needed in nearly all areas covered here in order to make more definitive determinations on whether or not these policies have achieved their aims (and if so, under what conditions, and how have they contributed to improving farm productivity and sustainability), and what secondary effects these policies have had on production and investment decisions in the sector.

For such an analysis to be conducted, further transparency in reporting of cross-country tax expenditures would be required (potentially as part of reporting already in place for the calculation of PSEs), and increased access to data on farm-level outcomes would also be helpful. While comparing income level before and after taxes would require only a few years, any investigation of impact would require a longer time series of farm (household) level data – especially when analysing the effect on income variability, long-term farm viability and structural adjustment, including land transfers. There is some evidence associated with the implementation of tax reforms, but long-standing concessions are rarely evaluated.

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[12] Van Der Hoeven, G. (2013), “Farm Transition: Tough Tasks at Hand and Why Transfer Tax Isn’t So Tough”, Choices, Vol. 28/1, http://www.choicesmagazine.org/choices-magazine/theme-articles/tax-theme/farm-transition-tough-tasks-at-hand-and-why-transfer-tax-isnt-so-tough (accessed on 1 October 2018).

[6] Van Der Veen, H. et al. (2007), Exploring Agricultural Taxation in Europe, LEI, The Hague, http://edepot.wur.nl/23200 (accessed on 4 October 2018).

[90] Warda (2001), “Warda, J. (2001), “Measuring the Value of R&D Tax Treatment in OECD Countries””, STI Review No. 27: Special Issue on New Science and Technology Indicators, http://www.oecd.org/sti/37124998.pdf.

[8] Williamson, J. and S. Bawa (2018), Estimated Effects of the Tax Cuts and Jobs Act on Farms and Farm Households, U.S. Department of Agriculture Economic Research Service, https://www.ers.usda.gov/publications/pub-details/?pubid=89355 (accessed on 28 September 2018).

[21] Williamson, J. and S. Stutzman (2016), “Tax Policy and Farm Capital Investment: Section 179 Expensing and Bonus Depreciation”, Agricultural Finance Review, Vol. 76/2, pp. 246-269, http://dx.doi.org/10.1108/AFR-07-2015-0031.

[67] Wright, S. and C. Mallia (2008), “The Dutch Approach to the Implementation of the Nitrate Directive: Explaining the Inevitability of its Failure”, Journal of Transdisciplinary Environmental Studies, Vol. 7/2, http://journal-tes.dk/vol_7_no_2/No_5_Stuart_Wright.pdf (accessed on 27 February 2019).

Annex A. Questionnaire on taxation in food and agriculture

Questionnaire coverage and definitions

A questionnaire was sent to countries included in the OECD monitoring and evaluation of agricultural policies to obtain information on taxation in agriculture (see next section). Countries covered in previous OECD work on taxation in agriculture (OECD, 2005[1]) (OECD, 2019[35]) were asked to update the information available in these reports. As a result, some country notes replicate some text already published in (OECD, 2005[1]) and country reviews on innovation, agricultural productivity and sustainability synthesised in (OECD, 2019[35]).

Main types of taxes covered are:

• Income taxation (income and profit)

• Property taxation1

  • Annual taxes (on land, buildings, financial assets)

  • Taxes on transfers (on capital gains, sales, gifts and inheritance)

• Tax on goods and services (e.g. value-added and general sales tax, excise duties)

• Environmental taxes (taxes and fees on farm inputs such as water, energy, machineries, fertilisers, pesticides).

• Other taxes

Basic features of taxes to be specified include:

• Subject of taxation: e.g. natural persons and legal entities.

• Object of taxation (tax base): e.g. farm income, market sales, land area, capital gains.

• Taxation period: definition of a tax year, and the possibility to average income over several tax years.

• Depreciation and other allowances2

• Tax rate

• Tax relief

Tax concessions can come in various forms of special treatment relative to the rest of the domestic economy, which relate to one of the basic features that characterise the structure of a tax. These can be formulated as follows:

• Exemptions: amounts excluded from the tax base

• Allowances: amounts deducted from the benchmark to arrive at the tax base

• Credits: amounts deducted from tax liability

• Rate relief: a reduced rate of tax applied to a class of tax payers or taxable transactions

• Tax deferral: a relief that takes the form of a delay in paying tax.

Response rate

Out of 48 countries queried, 33 responded to the questionnaire (Table A A.1). Country notes were developed for 35 countries based on information provided and complementary information to ensure cross-country comparability and inform broader policy conclusions.

Countries included for the first time in this agriculture taxation inventory are: Chile, Colombia, Costa Rica, Croatia, Estonia, Greece, Israel, Latvia, Lithuania, Mexico and Slovenia.

Table A A.1. Country responses to the OECD questionnaire on taxation in agriculture

Country	OECD Member	EU Member States	2005 report	Country reviews	Response	Country note prepared
Australia	OECD		1	1	1	1
Austria	OECD	EU	1	-	1	1
Belgium	OECD	EU	1	-	1	1
Brazil			-	1	-	-
Canada	OECD		1	1	1	1
Chile	OECD		-	-	1	1
China			-	1	-	-
Colombia			-	-	1	1
Costa Rica			-	-	1	1
Croatia		EU	-	-	1	1
Czech Republic	OECD	EU	1	-	1	1
Denmark	OECD	EU	1	-	1	1
Estonia	OECD	EU	-	1	1	1
Finland	OECD	EU	1	-	1	1
France	OECD	EU	1	-	1	1
Germany	OECD	EU	1	-	1	1
Greece	OECD	EU	1	-	1	1
Hungary	OECD	EU	1	-	1	1
Iceland	OECD		-	-	-	-
Indonesia			-	-	-	-
Ireland	OECD	EU	1	-	1	1
Israel	OECD		-	-	1	1
Italy	OECD	EU	1	-	1	1
Japan	OECD		1	1	-	1
Kazakhstan			-	-	-	-
Korea	OECD		1	1	1	1
Latvia	OECD	EU	-	1	1	1
Lithuania	OECD	EU	-	-	1	1
Luxembourg	OECD	EU	-	-	-	-
Mexico	OECD		-	-	1	1
Netherlands	OECD	EU	1	1	1	1
New Zealand	OECD		1	-	1	1
Norway	OECD		1	-	1	1
Philippines			-	-	-	-
Poland	OECD	EU	1	-	1	1
Portugal	OECD	EU	-	-	-	-
Russia			-	-	-	-
Slovak Republic	OECD	EU	1	-	1	1
Slovenia	OECD	EU	-	-	1	1
South Africa			-	-	-	-
Sweden	OECD	EU	1	1	1	1
Switzerland	OECD		1	-	1	1
Spain	OECD	EU	1	-	1	1
Turkey	OECD		-	1	-	-
United Kingdom	OECD	EU	1	-	1	1
United States	OECD		1	1	-	1
Viet Nam			-	Forthcoming	-	-
TOTAL	36	24	24	10	33	35

Questionnaire

For each type of tax please, please provide information on basic features defined above, and concessions specific to agriculture and agro-food companies, or likely to benefit them to a significant extent, for example because of the small size, or the use of a particular input (e.g. land, water, fuel).

If you are aware of any evidence on the impact of taxation on the productivity and sustainability of farms and agri-food companies from government evaluation or academic studies, please provide the references.

A. Overview

1. Please provide a brief overview of the tax system, including the general stance, coverage, and institutional framework (governance level), as was done in the 2005 OECD report (OECD, 2005[1]).

2. How is agriculture considered in the system? Are there specific provisions for farms or agriculture related businesses? If yes, for what purpose?

3. Please mention major reforms implemented in the last ten years or envisaged in the near future, and their purpose.

B. Income taxation

1. For income taxation, what tax regime(s) applies(y) to farmers and agro-food companies?

2. To what extent do these regimes differ from the general regime?

3. Are there any differences by legal status of the subject of taxation, by source of income (e.g. income from real estate properties, activities, capital investments, wages and salaries, professional and independent personal services, subsidies) or by activity (e.g. primary agriculture, processing, farm or non-farm activities)?

4. Are there any provisions allowing to smooth taxable income over time, such as tax deferral or saving schemes? If yes, are they specific to agricultural enterprises? Are they widely used?

5. Is there any evidence that income tax provisions have facilitated investment and innovation? Please provide references.

C. Property taxation

1. What arrangements apply to taxes a) on property (including land), which may relate to the value of the real estate, and b) on property transfers by gift, inheritance or sale?

2. Are there specific provisions for farm or farm household's assets, such as farmland, buildings, machineries, large livestock? Are there regional differences?

3. Is there any evidence of the effect of property taxation provisions on investment and farm transfers?

4. Is there any evidence of the effect of taxes on property value and property transfers on the environment, the use of natural resources and the resilience to climate change? If yes, what types of incentives lead to such impacts? Please provide references.

D. Tax on goods and services

1. What is the general tax regime on goods and services (e.g. value-added tax, general sales tax, excise duty)?

2. Does it apply to a) farm inputs and b) agricultural and food outputs or are there any specific provisions for them?

E. Environmental taxes

1. What are the main tax provisions used to improve the environmental impact of agriculture-related activities (e.g. taxes, levies and fees on the use of farm input and natural resources, such as water, energy, vehicles, fertilisers, pesticides)?

2. Do they apply equally to farm and non-farm activities? Do they differ by regions?

3. Is there any evidence of how effective they have been in reducing environmental impact of agri-food activities? Please provide references.

4. Are there any tax incentives to encourage the provision of environmental goods, in particular land-based ones (e.g. rebates for provision, and higher tax rates for non-provision)?

F. Tax incentives for R&D and innovation

1. What kind of tax incentives are used to facilitate private investment in R&D or the introduction of innovation?

2. What type of tax is concerned (e.g. labour, profit)?

3. Are there differences by type of company (e.g. by size, activity)?

4. Are tax incentives widely used by farms and agri-food companies?

G. Other taxes

1. What are provisions for taxes and social contributions on labour, including pensions? Are there specific provisions for agricultural labour? Do they apply equally to hired, self-employed or family labour in agriculture?

2. Are there any other tax exemptions applying to agriculture?

Annex B. Background tables

Overview of OECD tax statistics

The OECD Tax Database is available at: www.oecd.org/tax/tax-policy/tax-database.htm. It contains information on personal income tax rates (Table A B.1; Corporate and capital income tax rates (Table A B.2), Social security contributions, the tax burden on wage income, taxes on consumption (Table A B.3) and information on R&D tax incentives (Table A B.4), which originate from the OECD Main Science and Technology Indicators (available at: www.oecd.org/sti/msti.htm).

The OECD database on Instruments used for environmental policy documents the current use of environmentally related taxes (and a number of other environmental policy instruments). In addition to the revenues raised, the database gives information on the tax-base covered, the tax rates applied, important exemptions and refund mechanisms. Tax Rates of Environmentally Related Taxes are available at http://www.oecd.org/env/tools-evaluation/environmentaltaxation.htm.

Table A B.1. Central government personal income tax rates and thresholds, 2018

Thresholds in 1 000 National Currency; marginal rates in %

	Personal allowance	Tax credit	Surtax rate	Marginal rate (MR) 1	Threshold (Th) 1	MR2	Th 2	MR3	Th 3	MR4	Th 4	MR5	Max Threshold	Max MR	Number of rates
Australia	..	..	2.0	0	18	19	37	32.5	90	37	180	45	180	45	5
Austria	..	..	..	0	11	25	18	35	31	42	60	48	1 000	55	7
Belgium	7.4	..	..	25	9	30	13	40	22	45	40	50	40	50	5
Canada	..	1.8	..	15	47	21	93	26	144	29	206	33	206	33	5
Chile	..	..	..	0	7 833	4	17 407	8	29 012	14	40 617	23	69 628	36	7
Czech Republic	..	24.8	..	15		..		..	..	..	..	..		15	1
Denmark	..	5.1	8.0	11	499	26		..	..	..	..	..	499	26	2
Estonia	6.0	..	..	20		..		..	..	..	..	..		20	1
Finland	..	..	..	0	17	6	26	17	42	21	74	31	74	31	5
France	..	..	9.7	0	10	14	28	30	74	41	156	45	156	45	5
Germany	..	..	5.5	0	9	..	14	..	55	42	261	45	261	45	3
Greece	..	..	10.0	22	20	29	30	37	40	45	..	..	40	45	4
Hungary	..	..	..	15		..		..	..	..	..	..		15	1
Iceland	..	646.7	..	23	10 725	32		..	..	..	..	..	10 725	32	2
Ireland	..	1.7	8.0	20	35	40		..	..	..	..	..	35	40	2
Israel	..	5.8	..	10	75	14	107	20	173	31	240	35	642	50	7
Italy	..	1.9	..	23	15	27	28	38	55	41	75	43	75	43	5
Japan	380.0	..	2.1	5	1 950	10	3 300	20	6 950	23	9 000	33	40 000	45	7
Korea	1 500.0	..	..	6	12 000	15	46 000	24	88 000	35	150 000	38	500 000	42	7
Latvia	0.7	..	..	23		..		..	..	..		..		23	1
Luxembourg	1.0	0.6	7.0	0	11	8	13	9	15	10	17	11	44	38	19
Mexico	3.6	4.9	..	2	7	6	59	11	104	16	120	18	3 499	35	11
Netherlands		2.3	..	9	20	13	34	41	69	52		..	69	52	4
New Zealand		..	..	11	14	18	48	30	70	33		..	70	33	4
Norway	152.4	..	..	9	169	9	238	12	598	21	962	24	962	24	5
Poland	1.3	1.4	..	18	86	32		..		..		..	86	32	2
Portugal		..	2.5	15	7	23	11	29	20	35	25	37	81	48	7
Slovak Republic	3.8	..	..	19	35	25		..		..		..	35	25	2
Slovenia	3.3	..	..	16	8	27	20	34	48	39	71	50	71	50	5
Slovenia	3.3	..	..	16	8	27	20	34	48	39	71	50	71	50	5
Spain	5.6	..	..	10	12	12	20	15	35	19	60	23	60	23	5
Sweden	13.4	..	..	0	455	20	662	25		..		..	662	25	3
Switzerland	..	..	..	0	15	1	32	1	41	3	55	3	755	13	11
Turkey	..	..	0.8	15	15	20	34	27	120	35		..	120	35	4
United Kingdom	..	..	..	20	35	40	150	45		..		..	150	45	3
United States	..	..	..	10	10	12	39	22	83	24	158	32	500	37	7

Source: OECD (2019), OECD Tax Database, http://www.oecd.org/tax/tax-policy/tax-database.htm (extracted April 2019).

Table A B.2. Corporate income rate rates, 2018

Percentage

		Central government			Sub-central government tax rate	Combined corporate income tax rate
Country	Targeted	Corporate income tax rate	Statutory tax rate exclusive of surtax	Tax rate less deductions for sub-national taxes
Australia	Yes	30.0	..	30.0	..	30.0
Austria	No	25.0	..	25.0	..	25.0
Belgium	Yes	29.0	29.0	29.6	..	29.6
Canada		15.0	..	15.0	11.8	26.8
Chile		25.0	..	25.0	..	25.0
Czech Republic		19.0	..	19.0	..	19.0
Denmark	No	22.0	..	22.0	..	22.0
Estonia		20.0	..	20.0	..	20.0
Finland		20.0	..	20.0	..	20.0
France	Yes	34.4	33.3	34.4	..	34.4
Germany	No	15.8	15.0	15.8	14.0	29.8
Greece	Yes	29.0	..	29.0	..	29.0
Hungary	No	9.0	..	9.0	..	9.0
Iceland	Yes	20.0	..	20.0	..	20.0
Ireland		12.5	..	12.5	..	12.5
Israel		23.0	..	23.0	0.0	23.0
Italy	No	24.0	..	23.9	3.9	27.8
Japan	Yes	23.2	..	22.4	7.4	29.7
Korea		25.0	..	25.0	2.5	27.5
Latvia		20.0	..	20.0	..	20.0
Lithuania		15.0	..	15.0	..	15.0
Luxembourg		19.3	18.0	19.3	6.8	26.0
Mexico		30.0	..	30.0	..	30.0
Netherlands		25.0	..	25.0	..	25.0
New Zealand	No	28.0	..	28.0	..	28.0
Norway	Yes	23.0	..	23.0	..	23.0
Poland		19.0	..	19.0	..	19.0
Portugal	Yes	30.0	21.0	30.0	1.5	31.5
Slovak Republic	No	21.0	..	21.0	..	21.0
Slovenia		19.0	..	19.0	..	19.0
Spain	Yes	25.0	..	25.0	..	25.0
Sweden	No	22.0	..	22.0	..	22.0
Switzerland		8.5	..	6.7	14.4	21.1
Turkey		22.0	..	22.0	..	22.0
United Kingdom	Yes	19.0	..	19.0	..	19.0
United States		21.0	..	19.7	6.1	25.8
Argentina		30.0	..	30.0	..	30.0
Brazil		34.0	..	34.0	..	34.0
China		25.0	..	25.0	..	25.0
India		48.3	30.0	48.3	..	48.3
Russian Federation		20.0	..	20.0	..	20.0
Viet Nam		20.0	..	20.0	..	20.0

Source: OECD (2019), OECD Tax Database, http://www.oecd.org/tax/tax-policy/tax-database.htm (extracted April 2019).

Table A B.3. Value-Added and general sales taxes, as of 1 January 2018

Percentage rate

	Implemented	1995	2005	2010	2015	2016	2017	2018	Reduced rates (b)	Specific regional rates
Australia	2000	-	10.0	10.0	10.0	10.0	10.0	10.0	0.0	-
Austria*	1973	20.0	20.0	20.0	20.0	20.0	20.0	20.0	10.0/13.0	19.00
Belgium	1971	20.5	21.0	21.0	21.0	21.0	21.0	21.0	0.0/6.0/12.0	-
Canada*	1991	7.0	7.0	5.0	5.0	5.0	5.0	5.0	0.0	13.0/15.0
Chile	1975	18.0	19.0	19.0	19.0	19.0	19.0	19.0	-	-
Czech Republic	1993	22.0	19.0	20.0	21.0	21.0	21.0	21.0	10.0/15.0	-
Denmark	1967	25.0	25.0	25.0	25.0	25.0	25.0	25.0	0.0	-
Estonia	1992	18.0	18.0	20.0	20.0	20.0	20.0	20.0	0.0/9.0	-
Finland	1994	22.0	22.0	22.0	24.0	24.0	24.0	24.0	0.0/10.0/14.0	-
France*	1968	20.6	19.6	19.6	20.0	20.0	20.0	20.0	2.1/5.5/10.0	0.9/2.1/10.0/13.0 & 1.05/1.75/2.1/8.5
Germany	1968	15.0	16.0	19.0	19.0	19.0	19.0	19.0	7.0	-
Greece*	1987	18.0	18.0	19.0	23.0	23.0	24.0	24.0	6.0/13.0	4.0/ 9.0/16.0
Hungary	1988	25.0	25.0	25.0	27.0	27.0	27.0	27.0	5.0/18.0	-
Iceland	1990	24.5	24.5	25.5	24.0	24.0	24.0	24.0	0.0/11.0	-
Ireland	1972	21.0	21.0	21.0	23.0	23.0	23.0	23.0	0.0/4.8/9.0/13.5	-
Israel*	1976	17.0	17.0	16.0	18.0	17.0	17.0	17.0	0.0	0.0
Italy	1973	19.0	20.0	20.0	22.0	22.0	22.0	22.0	4.0/5.0/10.0	-
Japan	1989	3.0	5.0	5.0	8.0	8.0	8.0	8.0	-	-
Korea	1977	10.0	10.0	10.0	10.0	10.0	10.0	10.0	0.0	-
Latvia	1995	-	18.0	21.0	21.0	21.0	21.0	21.0	5.0/12.0	-
Lithuania	1994	18.0	18.0	21.0	21.0	21.0	21.0	21.0	5.9/9.0
Luxembourg	1970	15.0	15.0	15.0	17.0	17.0	17.0	17.0	3.0/8.0/14.0	-
Mexico	1980	10.0	15.0	16.0	16.0	16.0	16.0	16.0	0.0	-
Netherlands	1969	17.5	19.0	19.0	21.0	21.0	21.0	21.0	6.0	-
New Zealand	1986	12.5	12.5	12.5	15.0	15.0	15.0	15.0	0.0	-
Norway	1970	23.0	25.0	25.0	25.0	25.0	25.0	25.0	0.0/12.0/15.0	-
Poland	1993	22.0	22.0	22.0	23.0	23.0	23.0	23.0	5.0/8.0	-
Portugal*	1986	17.0	19.0	20.0	23.0	23.0	23.0	23.0	6.0/13.0	4.0/9.0/18.0 & 5.0/12.0/22.0
Slovak Republic	1993	25.0	19.0	19.0	20.0	20.0	20.0	20.0	10.0	-
Slovenia	1999	-	20.0	20.0	22.0	22.0	22.0	22.0	9.5	-
Spain*	1986	16.0	16.0	16.0	21.0	21.0	21.0	21.0	4.0/10.0	0.0/2.75/3.0/7.0/9.5/13.5/20.0 & 0.5/10.0
Sweden	1969	25.0	25.0	25.0	25.0	25.0	25.0	25.0	0.0/6.0/12.0	-
Switzerland	1995	6.5	7.6	7.6	8.0	8.0	8.0	7.7	0.0/2.5/3.7	-
Turkey	1985	15.0	18.0	18.0	18.0	18.0	18.0	18.0	1.0/8.0	-
United Kingdom	1973	17.5	17.5	17.5	20.0	20.0	20.0	20.0	0.0/5.0	-
Unweighted average		17.7	17.8	18.2	19.3	19.3	19.3	19.3

Note: * See country notes in Box 2.A2.1 of the source.

a. Yearly data: the rates shown in the table are rates applicable on 1 January of each year. Reduced rates and specific rates applicable in specific regions are those applicable as at 1 January 2018

b. Reduced rates: reduced rates include zero-rates applicable to domestic supplies (i.e. an exemption with right to deduct input tax). This does not include zero-rated exports.

Source: Annex Table 2.A.1 VAT rates from OECD (2018), Consumption Tax Trends 2018: VAT/GST and Excise Rates, Trends and Policy Issues, OECD Publishing, Paris, https://doi.org/10.1787/ctt-2018-en (last updated 11 December 2018).

Table A B.4. Tax subsidy rates on R&D expenditures, 2018

	Profitable firms			Loss-making firms
	A. Large	B. SME	Ratio A/B	A. Large	B. SME	Ratio A/B
Australia	0.1	0.19	1.4	0.07	0.19	1.0
Austria	0.17	0.17	1.0	0.17	0.17	1.0
Belgium	0.16	0.16	1.1	0.15	0.15	1.1
Canada	0.13	0.31	1.3	0.1	0.31	1.0
Chile	0.34	0.34	1.3	0.27	0.27	1.3
Czech Republic	0.21	0.21	1.4	0.15	0.15	1.4
Denmark	0	0	..	-0.01	-0.01	0.0
Estonia	0	0	..	0	0	..
Finland	-0.01	-0.01	1.0	0	0	..
France	0.43	0.43	1.2	0.35	0.43	1.0
Germany	-0.02	-0.02	1.0	-0.02	-0.02	1.0
Greece	0.11	0.11	1.4	0.08	0.08	1.4
Hungary	0.21	0.2	1.1	0.19	0.19	1.1
Iceland	0.24	0.24	1.0	0.24	0.24	1.0
Ireland	0.29	0.29	1.3	0.23	0.23	1.3
Israel	0	0	..	0	0	..
Italy	0.09	0.09	1.0	0.09	0.09	1.0
Japan	0.17	0.2	-17.0	-0.01	-0.01	1.0
Korea	0.03	0.26	1.5	0.02	0.21	1.2
Latvia	-0.01	0	..	-0.01	-0.01	1.0
Lithuania	0.31	0.31	1.2	0.25	0.25	1.2
Luxembourg	-0.01	-0.01	1.0	-0.01	-0.01	1.0
Mexico	0.07	0.07	1.4	0.05	0.05	1.4
Netherlands	0.13	0.31	1.0	0.13	0.3	1.0
New Zealand	-0.02	-0.02	1.0	-0.02	-0.02	1.0
Norway	0.21	0.23	1.0	0.21	0.23	1.0
Poland	0.22	0.22	1.2	0.18	0.18	1.2
Portugal	0.39	0.39	1.3	0.31	0.31	1.3
Slovak Republic	0.28	0.28	1.3	0.22	0.22	1.3
Slovenia	0.21	0.21	1.2	0.17	0.17	1.2
Spain	0.33	0.33	1.3	0.26	0.26	1.3
Sweden	0.05	0.05	1.0	0.05	0.05	1.0
Switzerland	-0.01	-0.01	1.0	-0.01	-0.01	1.0
Turkey	0.06	0.06	1.2	0.05	0.05	1.2
United Kingdom	0.11	0.27	1.0	0.11	0.27	1.0
United States	0.05	0.05	1.3	0.04	0.04	1.3
Brazil	0.27	0.27	1.0	-0.01	-0.01	1.0
Bulgaria	0	0	..	0	0	..
China (People’s Republic of)	0.15	0.23	1.3	0.12	0.19	1.2
Colombia	0.34	0.34	1.4	0.25	0.25	1.4
Romania	0.08	0.08	1.1	0.07	0.07	1.1
Russia	0.11	0.11	1.0	0	0	..
South Africa	0.16	0.16	1.2	0.13	0.13	1.2

Note: ..: not applicable. The tax subsidy rate is defined as 1 minus the B-index, a measure of the before-tax income needed by a “representative” firm to break even on USD 1 of R&D outlays. This is an experimental indicator based on quantitative and qualitative information representing a notional level of tax subsidy rate under different scenarios. It requires a number of assumptions and calculations specific to each country. Estimates allow for differences in the treatment of the various components of R&D expenditures: current (labour, other current) and capital (machinery and equipment, facilities/buildings). International comparability may be limited. For more information on R&D tax incentives, see http://oe.cd/rdtax, and for general notes and country-specific notes for this R&D tax incentive indicator, see http://oe.cd/sb2017_notes_rdtax.

Source: OECD (2019), OECD Tax Database, http://www.oecd.org/tax/tax-policy/tax-database.htm (extracted April 2019). Science, Technology and Industry Scoreboard 2017, https://doi.org/10.1787/9789264268821-en.

Notes

← 1.  Tax on property is a gross tax on the value of real property (real estate) with no deduction for debts. Tax on wealth is a net tax where the basic for taxation is the value of both real and financial capital reduced by debt.

← 2. The term “tax allowance” is defined as a reduction of the tax base.