The Tendencies of Taxation of Consumption in the OECD Countries Before and During the COVID-19 Pandemic

Abstract

The article is concerned with analyzing the tendencies of taxation of consumption in the OECD countries. The purpose of the article is to examine the tendencies of taxation of consumption in the OECD countries before and during the COVID-19 pandemic. According to the results of the research, it is found that in the period from 1995 to 2018 in the OECD countries there was a relatively stable tax burden formed by consumption taxes, with a gradual decrease in VAT rates. In many countries, the COVID-19 pandemic has caused a significant deterioration in public finances, adding to existing problems such as population aging, climate change, rising poverty and inequality, etc., the problem of reducing tax revenues in consequence of the reduced business activity and increased public spending on health care and economic support programs. It is noted that after the COVID-19 outbreak, the OECD countries periodically make adaptation changes to their policies, mainly aimed at adapting VAT in the context of the spread of digitalization and the need for fiscal support for certain sectors of the economy. The development and administration of VAT policies have become an important component in the most OECD government fiscal policy measures to mitigate the effects of the COVID-19 crisis in 2020–2021. The COVID-19 outbreak has led to a crisis in the healthcare and economic sectors, which has led to the use of measures to contain the pandemic. These measures reduced production, and in combination with the general crisis of the healthcare sector reduced the demand of enterprises and households. The economic policy measures focused primarily on maintaining business liquidity (deferring VAT payment) to help businesses stay afloat and to support the incomes of vulnerable households (applying reduced VAT rates). Prospect for further research is to assess the fiscal effects of modifying the taxation of consumption in the OECD countries during the COVID-19 pandemic.