OECD Data Shows Sharp Contrasts In National Tax Policies

by Ulrika Lomas, Tax-News.com, Brussels

14 October 2005

A new study by the Organisation for Economic Cooperation and Development (OECD) has found that Scandinavian countries continue to have the highest tax burdens as a share of national wealth among the 30 member countries, while the United States was shown to have one of the lowest tax burdens.

Data in the latest edition of the OECD's annual Revenue Statistics shows that Sweden once again had the highest tax-to-GDP ratio among OECD countries at 50.7%, a slight increase on last year's figure of 50.6%. Denmark came next at 49.6% (48.3% in 2003), followed by Belgium at 45.6% (45.4% in 2003) and Norway at 44.9% (43.4% in 2003).

At the other end of the scale, Mexico had the lowest tax-to-GDP ratio, at 18.5%, against 19.0% in 2003. Korea had the second lowest, at 24.6% (25.3% in 2003), and the United States had the third, at 25.4% (25.6% in 2003).

The Netherlands showed the biggest percentage-point reduction in the overall share of taxation in its economy, with the tax-to-GDP ratio falling two percentage points to 39.3% of GDP in 2004 from 41.3% in 1975. In Spain, by contrast, the tax-to-GDP ratio jumped by almost 17 percentage points from 18.2% in 1975 to 35.1% in 2004.

The OECD average corporate tax rate fell from 33.6% in 2000 to 29.8% in 2004, while the average top personal income tax rate fell from 47.1% to 44.0%. These resulted in marked falls in revenues between 2000 and 2002, when economic growth was sluggish, but a revival of economies in 2003 led to a recovery in revenues.

The latest figures also highlighted marked differences in the ways in which governments across the OECD raise money through taxation. While Denmark, Australia and New Zealand collected almost 60% of their revenues from personal and corporate taxes, at the other extreme Germany collected around 30% and France and Poland less than 25% from these sources.

Meanwhile, in North America, Mexico collected more than half of its tax revenue from taxes on the sales of goods and services while the United States raised less than a fifth of its revenue from this source.

Taking the 30-nation OECD area as a whole, the tax-to-GDP ratio calculated on an unweighted average basis fell marginally in 2003 – the latest year for which complete figures are available - to 36.3%, from 36.4% in 2002 and from a peak of 37.1% in 2000. In 1975, the average tax-to-GDP ratio was 30.3%.

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