Faced with rising public debt across the globe, the OECD is calling, among other recommendations, for increased taxation on assets to find room for manoeuvre in the event of future shocks.
“Decisive measures are needed to ensure debt sustainability,” the Organisation for Economic Co-operation and Development urged in a report published on Wednesday, recalling the “significant budgetary difficulties” linked to growing debt, demographic ageing and policies related to climate change.
$97 billion in 2023
Global public debt has soared in recent years, exacerbated by the Covid-19 pandemic and the war in Ukraine, reaching a record $97 trillion in 2023, according to a United Nations report published in June, almost double since 2010.
“In the absence of a lasting intervention, the future debt burden will continue to increase significantly and the room for manoeuvre to respond to future negative shocks will be increasingly limited,” the Paris-based organisation continued, estimating that “further efforts are needed to control spending and strengthen revenues.”
On the revenue side, the OECD suggests that States “adopt measures to eliminate tax expenditures that are a source of distortions and increase revenues from indirect taxes, environmental taxes and wealth taxes in many countries.”
Tax cooperation in the G20
Wealth taxes regularly arise in international debates in a context of very strong growth in the wealth of the richest thanks to the rise in share prices in recent years.
Taxing the richest is an issue that US presidential candidate Kamala Harris and the new French government, faced with a spiralling deficit, are particularly considering.
At the end of July, the OECD hailed a “remarkable achievement” after the G20 finance ministers agreed in a declaration to cooperate on tax matters to tax the largest fortunes, but failed, however, to agree on a global tax, which was the initial objective of Brazil, which is chairing the international forum this year, given the refusal of several States.
In addition to increasing income, the OECD, which brings together 38 developed countries, also calls for an emphasis on spending control. According to it, it is necessary to “improve the targeting of benefits and subsidies” and “launch new pension reforms to take due account of the increase in longevity.”
Rising debt and the cost of financing it are all the more problematic as interest rates remain high due to central banks’ monetary tightening to curb inflation in recent years, although they are gradually returning to more bearable levels.
Stripping out volatile prices, inflation is expected to fall to 5.4% this year and 3.3% next year within G20 countries, compared with 6.1% in 2023, leaving central banks more room to cut rates, which the US Federal Reserve and ECB have begun doing this year.
Global growth on the rise
The easing of monetary policy will help strengthen global growth, which the OECD forecasts at 3.2% this year, 0.1 points higher than its last forecast in May, and at an equivalent level next year.
Among the most dramatic changes, the OECD has dramatically raised its expectations for Spain, which is taking full advantage of the recovery in tourism, and the United Kingdom, whose growth rates are expected this year respectively at 2.8% and 1.1%, 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), Brazil’s to 2.9% (+1 point), while the United States’ growth forecast remains unchanged at 2.6%. Japan, on the other hand, is expected to be the only major developed country to experience a recession this year (-0.1%), and the OECD is expected to drastically revise its forecasts.
The euro area sees the OECD forecast for 2024 unchanged at 0.7% and revised slightly downwards to 1.3% in 2025, affected in particular by German growth expected at 0.1% this year and 1% next year.
Source: BFM TV
