The OECD is calling in particular for an increase in wealth taxation to control public debts which are increasing across the planet and to regain room for manoeuvre in the face of future “shocks”.
“Decisive action is needed to ensure debt sustainability,” the Organization for Economic Cooperation and Development urged in a report released Wednesday, noting the “significant fiscal challenges” posed by rising debt, an aging population and climate change policies.
Global public debt has soared in recent years, compounded by the COVID-19 pandemic and the war in Ukraine. It has reached a record $97 trillion by 2023, according to a United Nations report released in June, a near doubling since 2010.
“We need to do more to better control spending and […] “optimising tax revenues,” OECD Secretary-General Mathias Cormann said at a press conference on Wednesday, recalling that the public debt of G20 countries represented 113% of GDP last year compared to 73% in 2007.
“In the absence of sustained intervention, the future debt burden will continue to increase significantly and the room for manoeuvre to react to future negative shocks will be increasingly limited,” the Paris-based organisation emphasises in its report.
On the revenue side, the OECD suggests that states “adopt measures to remove distorting tax expenditures and increase revenue from indirect taxes, environmental taxes and property taxes in many countries.”
Tax cooperation at the G20
Wealth taxation regularly comes up in international debates against a backdrop of strong growth in the wealth of the richest thanks to soaring stock market prices in recent years.
Taxing the richest is notably being considered by American presidential candidate Kamala Harris, and by the new government in France, which is facing a spiralling public deficit.
At the end of July, the OECD had hailed a “remarkable achievement” after the commitment of the G20 finance ministers to cooperate on tax matters to tax the largest fortunes, without however managing to agree on a global tax which was the initial objective of Brazil which is chairing the international forum this year, in the face of the refusal of several States.
In addition to increasing revenues, the OECD, which brings together 38 developed countries, also calls for “improving the targeting of benefits and subsidies” and “undertaking further pension reforms to take due account of increasing longevity.”
The surge in debt and the cost of financing it is all the more problematic as interest rates remain high due to the monetary tightening policies decided by central banks to slow inflation, although this is gradually returning to more bearable levels.
Excluding volatile prices, inflation is expected to fall to 5.4% this year and 3.3% next year in the G20 countries, compared to 6.1% in 2023, giving central banks more room to lower rates, which they have started to do, like the US Federal Reserve and the ECB.
Global growth on the rise
The easing of monetary policies will help to strengthen global growth, which the OECD sees at 3.2% this year, up 0.1 percentage points from its last forecast in May, and at a similar level the following year.
Among the most spectacular changes, the OECD has sharply raised its forecasts for Spain, which is benefiting fully from the recovery in tourism, and the United Kingdom, whose consumption is doing better, with growth rates now expected this year at 2.8% and 1.1% respectively, i.e. increases of 1 point and 0.7 points.
In the midst of the war in Ukraine, Russia’s growth forecast has risen to 3.7% this year (+1.1 points), and Brazil’s to 2.9% (+1 point), while the United States’ has been maintained at 2.6%. Conversely, Japan would be the only major developed country to suffer a recession this year (-0.1%), with the OECD sharply revising its forecast.
For the Eurozone, the OECD forecast is unchanged for 2024 at 0.7% and revised slightly downwards for 2025 to 1.3%, affected in particular by German growth, expected this year at only 0.1% and 1% next year.