Denmark is confirmed as the OECD’s highest-tax country, followed by Sweden, while Mexico and Turkey remain the lowest-taxing countries, according to figures in the latest edition of the OECD’s annual Revenue Statistics publication

Overall, the average tax burden in the 30 OECD countries, calculated as a proportion of gross domestic product (GDP), is close to its historic peak of 36.1% in 2000. In 2006, the latest year for which complete figures are available, the tax-to-GDP ratio was 35.9%, up from 35.8% in 2005 and 35.2% in 2004.  See Table A.

Revenue Statistics presents detailed and internationally comparable tax data in a common format for all OECD countries from 1965 onwards. The latest figures show a continued rise in revenues from corporate income taxes to an average 3.9% of GDP in 2006, compared with 3.7% in 2005 and 3.6% in 2000. In 1975, revenues from corporate income taxes amounted to only 2.2% of GDP. See Table B.

Whether this trend will continue in 2008 is uncertain, however. “The current economic slowdown is going to put additional pressure on government budgets,” OECD Secretary-General Angel Gurría observed. Britain and the U.S. are already downgrading forecasts of how much revenue they can expect from the financial sector, and other countries are also likely to see a reduction in revenues from corporate income taxes.

Tax-to-GDP ratios are a reflection of government choices in fiscal policy, which can play a redistributive role that evens out inequalities. Despite Denmark’s high tax-to-GDP burden, surveys regularly report a high level of contentment among Danish citizens with the nation’s egalitarian society. By contrast, Mexico’s low tax-to-GDP ratio reflects a lack of redistributive policies and hinders the government’s ability to invest in the physical and social infrastructure that is required for a sustainable growth path.

Among other things, the latest figures show that:

• In 2007, tax burdens rose in 11 of the 26 countries for which provisional figures are available and fell in 13 others, suggesting that the average ratio for the 30 OECD countries is likely to remain at recent high levels. Between 2001 and 2004, the ratio had been declining, temporarily reversing a rising trend witnessed since the 1970s.
• The biggest year-to-year increases were in  Hungary, from 37.1% in 2006  to 39.3% in 2007, followed by Korea from 26.8% to 28.7% and Italy, from 42.1% to 43.3%.
• The biggest drop was in the Netherlands, from an estimated 39.3% to an estimated 38.0 %.
• Denmark had the highest tax-to-GDP ratio in 2007, at 48.9%, while Sweden came in second at 48.2%. In 2006, both countries had tax-to-GDP ratios of 49.1%. In 2005, Denmark had a tax-to-GDP ratio of 50.7%, against Sweden’s 49.5%.
• At the other end of the scale, Turkey collected taxes equivalent to 23.7% of GDP in 2007, against 24.5% in 2006 and 24.3% in 2005, while Mexico’s tax-to-GDP ratio was estimated at 20.5%, against 20.6% in 2006 and 19.9% in 2005.
• Since 1965, the contribution to total government revenues of corporate income taxes increased from 9% to 11% and that of social security charges has jumped from 18% to 25%. The share of personal income taxes, by contrast, has fallen back to below 1965 levels after rising in the 1970s and 1980s. See Table C.

 

Revenue Statistics is available to journalists on the OECD's password-protected website or on request from the Media Division. For further information, journalists are invited to contact the OECD's Media Division (tel. [33] 1 45 24 97 00) or Christopher Heady in the OECD’s Centre for Tax Policy and Administration (tel [33] 1 45 24 93 22).

 

The publication can be purchased in paper or electronic form through the OECD’s Online Bookshop. Subscribers and readers at subscribing institutions can access the online version via SourceOECD.

For all tables, click here.