Tax revenues in advanced economies reached a plateau during 2018, ending the trend of annual increases in the tax-to-GDP ratio seen since the financial crisis, according to the OECD’s latest research
The OECD average tax-to-GDP ratio was 34.3% in 2018, virtually unchanged since the 34.2% in 2017. The UK average increased by 0.2 percentage points from 33.3% in 2017 to 33.5% in 2018, placing the UK 20th out of 36 OECD countries.
Relative to the OECD average, the tax structure in the United Kingdom is characterised by higher revenues from taxes on personal income, profits and gains, property taxes, and VAT.
The UK has a lower proportion of revenues from taxes on corporate income and gains, social security contribution, and goods and services taxes, as well as no revenues from payroll taxes.
Elsewhere, the OECD said major reforms to personal and corporate taxes in the US prompted a significant drop in tax revenues, which fell from 26.8% of GDP in 2017 to 24.3% in 2018.
These reforms affected corporate income tax revenues, which fell by 0.7 percentage points, and personal income tax revenues, down by 0.5 percentage points).
Decreases were also seen in 14 other countries, led by a 1.6 percentage point drop in Hungary and a 1.4 percentage point drop in Israel. In contrast, nineteen OECD countries report increased tax-to-GDP ratios in 2018, led by Korea (1.5 percentage points) and Luxembourg (1.3 percentage points).
In 2018, four OECD countries had tax-to-GDP ratios above 43% (France, Denmark, Belgium and Sweden) and four other EU countries also recorded tax-to-GDP ratios above 40% (Finland, Austria, Italy and Luxembourg).
Five OECD countries (Mexico, Chile, Ireland, the United States and Turkey) recorded ratios under 25%. The majority of OECD countries had a tax-to-GDP ratio between 30% and 40% of GDP in 2018.