Tax revenues increase across OECD

Tax revenues continue to rise across the OECD (Organization for Economic Co-operation and Development) from the low levels reported during the height of the Great Recession, according to the OECD’s annual Revenue Statistics.

The average tax revenue to GDP ratio among the 30 OECD members where data were available was:

• 2012 – 34.6%
• 2011 – 34.1%
• 2010 – 33.8%

The ratio of tax revenue to GDP rose in 21 nations and fell in 9. According to the OCED “The number of countries with increasing and decreasing ratios was similar to that seen in 2011, indicating a continuing trend toward higher revenues.”

The countries with the largest tax revenue increases were New Zealand, Italy, Greece and Hungary, and those with the largest falls were the United Kingdom, Portugal and Israel.

The increasing tax ratios from 2011 to 2012 that occurred were the results of a range of factors. In **progressive tax regimes revenue outpaces incomes during periods of real income growth.

** Progressive tax is a system in which low-wage earners pay a smaller percentage of their income in tax compared to higher-wage earners.

Discretionary tax changes have also helped increase tax revenue. Several nations raised tax rates and/or taxed a broader range of goods and services.

The OECD wrote “Discretionary tax changes played a greater role in a handful of European countries where GDP levels actually declined in 2012.”

Tax revenues have not risen for local governments

According to the new data, tax revenues have risen in central, state and regional governments following the falls in 2008-2009, but have remained steady since 2007 for local governments.

Below are some other key findings from the OECD’s annual Revenue Statistics:

• The average tax burden rose by 0.5 percentage points in OECD nations to 34.6% in 2012, following increases of 0.2 and 0.3 percentage points in 2010 and 2011, reversing the decline during the height of the Great Recession.

• Countries have not yet reached the tax burden peak of 35% in 2007.

• The nations with the largest tax ratio increases (in percentage points) were Hungary 1.8, Greece 1.6, Italy and New Zealand 1.4, and Belgium, France and Ireland 1.2.

• The nations with the largest falls were Israel 1, and Portugal and the UK 0.5.

• The ratio in the US rose from 24% in 2011 to 24.3% in 2012, a smaller increase than the OECD average.

• Compared to pre-recession tax to GDP ratios, those of four countries in 2012 were still more than 3 percentage points down – Spain, Sweden, Israel and Iceland.

• Turkey’s tax burden between 2007 and 2012 rose from 24.1% to 27.7%. Mexico, Luxembourg, France and Belgium reported increases of more than 1.5 percentage points.

• At a tax to GDP ratio of 48% in 2012, Denmark’s is the highest, followed by 43.5% in France and Belgium.

• Mexico 19.6% and Chile 20.8% have the lowest ratios in the OECD. The US comes third, followed by South Korea.