Six surprising facts about tax revenues around the world
Governments globally are wrestling with how to finance their spending needs. We delve into OECD data and uncover some notable findings about taxes around the world.
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1. Most economies are taxed more now relative to GDP than at any point for more than half a century
Tax as % of GDP: OECD average
Data covers the 38 countries in the OECD. Data for all countries is to 2022, or 2021 if unavailable. Source: OECD
This has been a trend across the majority of countries. Since 2012, over three quarters of countries in the Organisation for Economic Co-operation and Development (OECD) have experienced an increase in taxation as a percentage of GDP. Since 1980, around 90% have.
That being said, there is substantial variation between countries. Taxes are higher as a share of GDP in many European countries whereas they tend to be lower in the Americas. There are exceptions, of course. Ireland, for example.
Tax as a share of GDP, latest data
Data covers the 38 countries in the OECD. Data for all countries is to 2022, or 2021 if unavailable. Source: OECD
2. Taxes have risen, as a share of GDP, across almost all major categories across most major economies
Percentage of OECD countries which have increased tax income from various sources, as a share of GDP, over the past 30 years
Data covers the 38 countries in the OECD. Data for all countries is to 2022, or 2021 if unavailable. Source: OECD
3. This overall rise in taxation has happened despite corporate income tax rates falling by around half since the 1980s
Statutory corporate income tax rate: OECD average
Data covers the 38 countries in the OECD. Data to 2023. Source: Schroders and The Tax Foundation.
One high-profile story has been the “rates war” on corporation tax. Countries have battled to offer the lowest rates in an attempt to attract companies to base or expand their presence there. The average corporate tax rate globally has declined substantially.
The hope is that the overall economic benefit will be greater than the tax revenue forgone by cutting the corporate tax rate. For example, these companies will employ people who pay income tax and who buy taxed goods and services.
It is also worth noting that pre-tax profits have increased by so much that overall corporation tax revenues have risen as a share of GDP, despite these lower headline tax rates. Governments have captured a smaller percentage but of a bigger profit-pie.
4. Corporation taxes are a fairly minor source of government revenues vs the rest
Contribution to total tax revenue: OECD average
Data covers the 38 countries in the OECD. Data for all countries is to 2022, or 2021 if unavailable. Source: OECD and Schroders
Other forms of taxation matter much more to the government finances, at least on a direct basis (corporations indirectly support a lot of other taxes, as described earlier).
Goods and services taxes (including VAT), social security, and personal income taxes are more prominent than corporation tax. Importantly, this is not a consequence of the reductions in corporate tax rates. As highlighted earlier, despite these declines, corporation taxes have risen as a share of GDP across the OECD.
5. Value-added tax (VAT) and other goods and services taxes (e.g. duties) contribute a far higher amount to the coffers
Goods and sales tax (including VAT) revenues as a multiple of corporation tax revenues
Data covers the 38 countries in the OECD. Data for all countries is to 2022, or 2021 if unavailable. Source: OECD and Schroders
6. The UK consumer’s obsession with house prices is matched by the government’s desire to extract revenues from the sector
Property taxes as % of GDP
Data covers the 38 countries in the OECD. Data for all countries is to 2022, or 2021 if unavailable. Source: OECD and Schroders
Tax revenues derived from property are higher in the UK, as a percentage of GDP, than any other major economy, other than Israel. They are more than double the OECD average.
At the other end of the scale, Estonia levies no taxes on property transactions at all (e.g. there is no stamp duty), and its ongoing property taxes are based on the value of land, not any property on the land.
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