Tax revenues continue bouncing back from the low levels reported in almost all countries , at the height of the global economic crisis, according to new OECD data in the annual Revenue Statistics publication. The average tax revenue to GDP ratio in OECD countries was 34.6% [1] in 2012, compared with 34.1% in 2011 and 33.8% in 2010.
The ratio of tax revenues to GDP rose in 21 of the 30 countries for which 2012 data is available, and fell in only 9 countries. The number of countries with increasing and decreasing ratios was similar to that seen in 2011, indicating a continuing trend toward higher revenues.
The largest increases in 2012 occurred in Hungary, Greece, Italy and New Zealand. The largest falls were in Israel, Portugal and the United Kingdom.
The increase in tax ratios between 2011 and 2012 is due to a combination of factors. In progressive tax regimes, revenue rises faster than income during periods of real income growth. Discretionary tax changes have also played a role, as many countries raised tax rates and/or broadened tax bases. Discretionary tax changes played a greater role in a handful of European countries where GDP levels actually declined in 2012.
The new data point to rising revenues in central, state and regional governments following the declines in 2008 and 2009, whereas the average tax ratio for local governments has remained steady since 2007.
Other key findings:
The average tax burden in OECD countries increased by 0.5 percentage points, to 34.6% in 2012. This followed rises of 0.2 and 0.3 percentage points in 2010 and 2011, reversing the decline from 35% to 33.6% between 2007 and 2009. This is still below the most recent peak year of 2007 when tax revenues to GDP ratios averaged 35%.
Between 2011 and 2012, the largest tax ratio increases were in Hungary (1.8 percentage points) and in Greece (1.6 points). Other countries with substantial rises in their tax to GDP ratio between 2011 and 2012 were Italy and New Zealand (1.4 points), plus Belgium, France and Iceland (1.2 points).
The largest fall was in Israel with a decline from 32.6% to 31.6%. Portugal and the United Kingdom showed falls of 0.5 percentage points.
The increase in the United States, from 24.0% of GDP in 2011 to 24.3% in 2012, was lower than that seen in the OECD area.
Compared with 2007 (pre-recession) tax to GDP ratios, the ratio in 2012 was still down by more than 3 percentage points in four countries – Iceland, Israel, Spain and Sweden. The biggest fall has been in Israel - from 36.4% in 2007 to 31.6% of GDP in 2012.
The tax burden in Turkey increased from 24.1% to 27.7% between 2007 and 2012. Four other countries (Belgium, France, Luxembourg and Mexico) reported increases of more than 1.5 percentage points over the same period.
Denmark has the highest tax-to-GDP ratio among OECD countries (48% in 2012), followed by Belgium and France (43.5%).
Mexico (19.6% in 2012) and Chile (20.8%) have the lowest tax-to-GDP ratios among OECD countries. They are followed by the United States which has the third lowest ratio in the OECD region at 24.3% and Korea at 26.8%.
Revenues from personal and corporate income taxes are now recovering, following the sharp falls seen during the 2008-09 crisis period. Data for 2011 - the latest year for which a breakdown of revenues by category of tax is available for all OECD countries - shows that the 33.5% share of these taxes in total revenues remains below their 35.9% share in 2007. The share of social security contributions has increased by 1.6 percentage points, to an average of 26.2% of total revenues.
