Changes in tax to GDP ratio (in % points) 1995-2005

Source: OECD

The average tax burden in 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.

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 (see Table A), 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.

Source: OECD

The Table above shows that in 2005, Irish taxation as a percentage of GDP was 30.6% in 2005 and 31.7% in 2006 compared with 32% in 1995. However, because GDP includes the output of the multinational sector, which is very significant in Ireland (almost 90% of Irish exports are made by foreign-owned firms), it is more useful to use Gross National Product - the total value of final goods and services produced in a country plus income from Irish capital held abroad set-off against transfers of net earnings of multinationals - in effect net income outflows from Ireland . In Other OECD countries, there is only a marginal difference between GDP and GNP.

The latest OECD figures showed a slight increase in the proportion of revenue collected  through general consumption taxes, which take the form of value added taxes (VAT) throughout the OECD except in the U.S. 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 (see Table B).

Over a 40 year time span, however, 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 (see Table C).

Revenue Statistics presents detailed and internationally comparable tax data in a common format for all OECD countries from 1965 onwards. It also gives a conceptual framework to define which government receipts should be regarded as taxes and to classify different types of taxes.

The advantages and disadvantages of indirect taxes over direct taxes are reviewed in an OECD Policy Brief entitled Consumption Taxes: The way of the future? issued simultaneously with the latest edition of Revenue Statistics. The appropriate choice for individual countries depends on circumstances, but particularly on views about the relative importance of growth and inequality as well as the ability to offset the effects of inequality through other measures without harming growth.

OECD member countries - - Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States (30 Member Countries)