24/11/2009 - The recession is taking its toll on tax receipts across the OECD. Aggregate tax burdens in OECD economies, calculated as the ratio of tax revenues to gross domestic product, or GDP, were unchanged between 2006 and 2007, and then fell in 2008. The reduction in the tax burden in 2008 is estimated to have been some ½ percent of GDP, from 35.8% to an estimated 35.2%.
Many more OECD countries saw falls rather than increases in their tax burdens in 2008. Tax burdens are also likely to have fallen further in 2009. Tax receipts often fall proportionately more than GDP in a recession and on top of that many OECD countries cut taxes in late 2008 and early 2009 to support aggregate demand following the financial crisis of September 2008.
“Governments acted decisively in 2008 and 2009 to support demand during the crisis,” OECD Secretary-General Angel Gurría noted. “But falling tax receipts underline the challenge they will face, once the recovery is secured, in maintaining sound public finances”
The OECD’s annual Revenue Statistics publication provides a long series of historic data for the 30 member countries of the OECD. It provides data not just on aggregate tax burdens but on breakdowns between different taxes. By bringing all these cross-country data together, it provides analysts and commentators with a platform for understanding and interpreting more recent developments in tax receipts.
According to the latest edition:
• The overall tax-to-GDP ratio in OECD countries was 35.8% in 2007, the latest year for which complete figures are available, unchanged from 2006. In 2005, the tax-to-GDP ratio was 35.7% and in 2004 it was 35.1%. The highest ratio on record was 36.0%, in 2000 (see the chart below).
• Out of 26 OECD countries that have provided provisional figures for 2008, tax-to-GDP ratios fell in 17 and rose in 9. Historically, tax-to-GDP ratios rose during the 1990s as governments needed increased revenues to finance public expenditures and reduce budget deficits. They fell back slightly between 2001 and 2004, but then rose again between 2005 and 2007. Provisional figures for 2008 suggest the overall ratio may have fallen back again, possibly by around half a percentage point.
• Denmark has the highest tax-to-GDP ratio among OECD countries in 2008 (48.3%), closely followed by Sweden (47.1%). These two countries together with Finland and New Zealand are the only OECD countries to see a fall in tax burdens in each of the last three years for which data are available.
• Mexico and Turkey have the lowest tax-to-GDP ratios among OECD countries. Mexico collected taxes equivalent to 21.1% of GDP in 2008, against 18.0% in 2007 and 18.3% in 2006. Turkey’s tax-to-GDP ratio was 23.5% in 2008 against 23.7% in 2007 and 24.5% in 2006.
• Lower revenues from income taxes, property taxes and taxes on goods and services pushed tax-to-GDP ratios down to 36.0% in 2008 from 40.9 per cent in 2007 in Iceland; to 33% from 37.2% in Spain; and to 28.3% from 30.8% in Ireland.
• The largest increases in the tax to GDP ratio were in Mexico where it rose to 21.1% in 2008 from 18.0% in 2007, and in Luxembourg to 38.3% from 36.5%, reflecting higher oil revenues in Mexico and increased revenues from income taxes and taxes on goods and services in Luxembourg.
• Revenues from personal and corporate income taxes in OECD countries rose to 13.2% of GDP in 2007, from 13.0% in 2006 and 12.8% in 2005, exceeding the previous historical peak of 13.1% in 2000. Within this total, revenues from corporate income taxes accounted for an average of 3.9% of GDP in both 2006 and 2007, compared with 3.7% in 2005 and 3.6% in 2000. In 1975, these revenues comprised only 2.2% of GDP.
Total tax ratio as percentage of GDP, 2007
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For further information, please contact: Jeffrey Owens, Director of the OECD’s Centre for Tax Policy and Administration, (tel. +33 1 45 24 91 08, e-mail: firstname.lastname@example.org) or Stephen Matthews, Chief Tax Economist/Head of the Tax Policy and Statistics Division, (tel. +33 1 45 24 93 22, e-mail: email@example.com)
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