Overall OECD Tax Burden May Have Risen In 2003

by Mike Godfrey, Tax-News.com, Washington

22 October 2004

The OECD revealed this week that the tax burden in several member countries crept higher in 2003, breaking a trend that has seen the overall tax burden shrinking since 2000.

The OECD’s annual Revenue Statistics data for 2003 shows the ratio of tax to gross domestic product rising in 13 of the 23 countries for which figures are available, following a tax burden decline in most members between 2000 and 2002.

The largest overall increases between 2002 and 2003 were in Iceland, where taxation as a share of the national economy rose from 38.1% of GDP to 40.3%, Turkey (up from 31.1% to 32.9%) and Ireland (up from 28.4% to 30.0%).

Conversely, a number of countries experienced a particularly large reduction in their tax to GDP ratio. One example of this is the United States, where lower personal income tax rates and higher tax credits shrank the tax burden by 4.5% of GDP between 2000 and 2003.

Substantial reductions in the tax to GDP ratio were also experienced over the same period in Finland (3.1%), Sweden (3.0%), the Netherlands (2.4%), and the United Kingdom (2.1%).

Overall, the Revenue Statistics show that the average tax-to-GDP ratio in OECD countries has trended lower in the past few years after rising sharply between 1975 and 2000. Upon reaching a peak of 37.2% in 2000, the average ratio fell to 36.8% in 2001 and 36.3% in 2002.

However, the provisional figures for 2003 suggest the downward trend is coming to an end, possibly in part reflecting stronger economic growth.

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