A new OECD report, Tax Design for Inclusive Economic Growth, argues that at a time of historically high income and wealth inequality, tax policy can play a key role in not only supporting growth, but also in addressing distributional concerns.

The OECD work will be discussed during a ministerial-level G20 tax symposium on July 23 in Chengdu, China, just prior to the meeting of the G20 finance ministers and central bank governors on 23-24 July.

The report looks at four key issues. These are broadening tax bases and removing tax expenditures that are not well-targeted at redistributive goals; enhancing the progressivity of tax systems beyond personal income tax; taking steps to affect pre-tax behaviours and opportunities; and enhancing tax policy and administration.

The OECD suggests that further analysis be undertaken to identify the scenarios where tax reforms stimulate inclusive growth and those where they do not, and how such tax reforms will interact with a country’s existing tax policy settings, its level of inequality and its stage of development.

The OECD Centre for Tax Policy and Administration has recently completed a review of the organisational structure and institutional arrangements of Italy’s tax administration, which examined concerns about tax compliance and collection.

The review found the focus of efforts to reduce non-compliance has historically been on audits and control, which result in assessments that reportedly are often uncollectable, with no comprehensive strategy across the entities involved in tax administration to address this issue in a holistic manner. The OECD says there is a significant opportunity for Italy to reform tax administration in a way that rationalises resources, provides increasingly high-quality services to taxpayers and secures improved voluntary compliance by taxpayers at large.

Its specific recommendations include reforms which aim at generating significant behavioural change, by both taxpayers and tax administration, plus revised institutional and governance arrangements to ensure a more strategic political oversight of the tax administration, which should go along with restoring the autonomy of the tax and customs agencies.

The OECD also wants to see Italy adopt a more holistic approach to support and enhance voluntary compliance by taxpayers while ensuring that those that do not comply are promptly identified and sanctioned. It says the collection of tax debt needs to be modernised, with more use made of information technology and data analytics to streamline processes.

The report said: ‘What is needed is a structural reform which results in behavioural changes of all players rather than purely institutional changes. More coherence will be achieved with increased strategic oversight at ministerial level and with more autonomy of the agencies in the implementation of this strategy.’

Meanwhile, the Spanish government has indicated it plans to increase company tax to raise an extra €6.6bn (£5.5bn) next year. It says it intends to set a ‘minimum amount’ of tax that companies must pay, and will crackdown on tax evasion to increase revenues, but has stopped short of raising personal income tax rates.

Spain’s budget deficit was 5.2% in 2015 and is predicted to fall to 3.9% this year but is still well above the 3% ceiling permitted by EU monetary stability rules. Recently the EU said it planned to initiate sanctions procedures against both Spain and Portugal for persistently missing deficit targets, which could open the way for fines.

The OECD Tax Design for Inclusive Economic Growth report is here.