Global tax to GDP ratio hits 26%, says OECD

The OECD has created a global database revealing the level of tax paid in comparison to GDP in 80 countries globally with the median tax-to-GDP ratio worldwide hitting 26.2%

The Global Revenue Statistics Database covers comparable tax revenue data and provides country-specific indicators on tax levels and structures from over 80 countries.

In the last 20 years OECD said that countries have made ‘strong progress towards mobilising domestic financing for development. Levels of tax revenues are now higher and more, even across countries than at the turn of the century; and countries with the lowest revenues have experienced the largest increases in their tax-to-GDP ratios’.

Across the 80 countries, tax-to-GDP ratios range from 10.8% to 45.9%, while the median tax-to-GDP ratio is 26.2%. Half of the countries have a tax-to-GDP ratio ranging between 18.2% and 33.2% of GDP.

Since 2000, three-quarters of the countries analysed have increased their tax to GDP ratios with half the countries increasing their tax-to-GDP ratios by between 0 and 5% of GDP; and one in four growing their tax rate by up to 5% of GDP. Most of these countries are from Africa and Latin America. The remaining quarter of countries, where tax-to-GDP ratios fell, are predominantly OECD countries.

In Africa (16) and LAC, taxes on goods and services (especially VAT) and corporate income taxes are particularly important as a share of revenues. Social security contributions and personal income taxes form the highest shares of tax revenue in most OECD countries, with VAT playing a smaller role.

Since 2000, VAT has become increasingly significant in more than three-quarters of the countries, in many cases, with corresponding falls in the share of income taxation or taxes on other goods and services. The exceptions are the quarter of countries with the highest increases in their tax to GDP ratios, which recorded strong increases in most or all major tax types.

Per capita income, and different types of tax structures, are linked to the level of taxation. There is a positive correlation between tax-to-GDP levels, per-capita income levels and the share of personal income tax and social security contributions. However, there is a negative correlation between tax-to-GDP levels and the shares of corporate taxes and taxes on goods and services.

The database will be extended to cover more than 90 countries by the end of 2018 and the OECD hopes it will strengthen the capacity of governments and policy-makers to develop and implement tax policy reforms that will raise domestic resources to fund the provision of vital public goods and services.

‘With information covering 80 countries, the Global Revenue Statistics Database sets the global standard for robust and comparable tax revenue data,’ said Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration. ‘It is a vital foundation for tax policy reform and in supporting efforts to raise domestic resources to fund development’.

OECD Global Revenue Statistics Database http://www.oecd.org/tax/tax-policy/global-revenue-statistics-database.htm

Report by Rob Munro

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