OECD countries acknowledge that taxes must play a role in the process of fiscal consolidation as they battle unprecedented budget deficits. New OECD data in the annual Revenue Statistics publication show that the majority of OECD governments have stabilised their tax to GDP, with the average ratio moving up slightly from 33.8% in 2009 to 33.9% (1) in 2010. That’s still down from 34.6% in 2008 and well below the most recent high point of 2007 when tax to GDP ratios averaged 35.2%.
Total tax revenue as percentage of GDP, 2009
Countries have been ranked by their total tax revenue to GDP ratios
Source: Revenue Statistics,1965-2010, 2011 Edition.
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The underlying message from these comparisons is complex, as changes in tax revenues reflect not only changes in economic activity but also policy measures.
In those European countries most affected by the financial crisis and subsequent recession there was an initial sharp fall in tax revenues, but then a small recovery in the tax to GDP ratio in 2010.
The data collected also show that in a period when all levels of government have seen pressure on expenditure and revenues, the average tax ratio for state, regional and local governments has remained steady since 2007 while that for central government has declined.
In the latest edition
- Out of 30 OECD countries for which provisional 2010 figures are available, tax-to-GDP ratios rose in 17 and fell in 13.
- Compared with 2007 pre-crisis tax to GDP ratios, the ratio in 2010 was still down more than 3 percentage points in six countries. In Spain it declined from 37.2% to 31.7% and in Iceland from 40.6 to 36.3%. Chile, Israel, New Zealand and the United States showed declines of 3-4 percentage points over the same period.
- Historically, tax-to-GDP ratios rose during the 1990s and the highest ratio on record was 35.3%, in 2000. They fell back slightly between 2001 and 2004, but then rose again between 2005 and 2007 before falling back following the crisis.
- The proportion of tax revenues accounted for by social security contributions rose from 25% to 27% between 2007 and 2009 whereas the shares of taxes on corporate income and capital gains fell from 11% to 8% over the same period. The shares of the other major tax categories were largely unchanged.
- Denmark has the highest tax-to-GDP ratio among OECD countries (48.2% in 2010), followed by Sweden (45.8%).
- Mexico (18.7% in 2010) and Chile (20.9%) have the lowest tax-to-GDP ratios among OECD countries. The United States has the third lowest ratio in the OECD region at 24.8% with Korea at 25.1% and Turkey at 26.0%.
- The tax burden increased from 31.4% to 34% between 2007 and 2010 in Estonia. Two other countries; Luxembourg and Turkey showed increases of 1-2 percentage points over the same period.
To obtain a copy of Revenue Statistics please e-mail firstname.lastname@example.org.
For further information please contact OECD’s Centre for Tax Policy, Jeffrey Owens at + 331 45 24 91 08 or Stephen Matthews at + 331 45 24 93 22.