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OECD Tax Burden Back To 2000 Peak

by Ulrika Lomas, Tax-News.com, Brussels

19 October 2007


The average tax burden in the thirty OECD countries, measured as the ratio of tax to gross domestic product (GDP), is back up to the same levels as in 2000 after a brief reduction between 2001 and 2004, according to figures in the latest edition of the OECD’s annual Revenue Statistics publication.

According to the report, in 2006, tax burdens as a proportion of GDP rose in 14 of the 26 countries for which provisional figures are available, by comparison with 2005, and fell in 11, indicating that there is likely to have been little year-on-year change in the average tax burden for the 30 OECD countries.

The average tax burden in the 30 OECD countries reached 36.2% of GDP in 2005, the latest year for which complete figures are available, up from 35.5% in 2004, and level with the historical high of 36.2% recorded in 2000.

Three countries (Italy, Ireland and Korea) saw their tax burdens rise by more than one percentage point between 2005 and 2006, while another three (Luxembourg, New Zealand and the Slovak Republic) experienced reductions of more than one percentage point.

Over the period 1995 to 2005, only 6 of the 30 OECD members saw their tax to GDP ratio fall, the largest being in the Slovak Republic and Hungary, by 5% and 4% respectively. Smaller decreases occurred in the Netherlands, Germany, Canada, Poland, Finland, Ireland and the United States. Iceland and Turkey saw their tax to GDP ratios increase by about 10% over this period, and Korea saw an increase of 6%. Meanwhile, the UK and Switzerland experienced a 2% rise in their tax burdens, France, Luxembourg and Italy saw a rise of about 1%, and Japan experienced an increase of about 0.5%.

The latest figures showed a slight increase in the proportion of revenue collected through general consumption taxes, which take the form of value added taxes throughout the OECD (except in the US and some Canadian provinces). These averaged out at the equivalent of 6.9% of GDP in OECD countries in 2005, up from 6.8% in 2004 and 6.7% in 2000

However, over a 40 year time span, the OECD said that its figures show no widespread shift in the tax burden from direct to indirect taxes, contrary to some public perceptions, because growth in VAT revenues has been mirrored by an even greater reduction in specific consumption taxes, mainly excise duties.

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