Personal income taxes are playing an increasingly significant role in the tax mix as revenues from social security contributions and consumption taxes fall, and corporate tax collections remain low, the Organisation for Economic Cooperation and Development concludes in a new report.
The Revenue Statistics 2017 report shows that OECD countries are becoming more dependent on personal income tax revenues. The average share of personal income tax of the total tax revenue increased from 24.1 percent in 2014 to 24.4 percent in 2015, as the revenue share of social security contributions and taxes on goods and services dropped slightly, making up 25.8 percent and 32.4 percent respectively of the average tax intake.
Corporate income taxes fell significantly during the financial crisis and have not recovered since. They are hovering at around 8.9 percent of revenues, after dropping from 11.2 percent in 2007 to a low of 8.8 percent in 2010, the OECD report noted.
However, the tax intake of OECD countries relative to the size of their respective economies increased again on average in 2016 from 34 percent to 34.3 percent.
The average OECD tax-to-GDP ratio is now higher than at any point since 1965, including prior peaks in 2000 and in 2007. During the past 51 years, the average tax-to-GDP ratio in the OECD area increased by 9.5 percentage points from 24.8 percent to 34.3 percent.
But the picture was mixed with 20 of 33 OECD countries seeing rising tax-to-GDP ratios in 2016 and the remainder noting a decline.
Denmark, France and Belgium are the countries with the highest tax-to-GDP ratios of up to 45.9 percent, while Mexico (17.2 percent), Chile (20.4 percent) and Ireland (23.0 percent) account for the lowest share of tax revenue relative to their gross domestic product.
All but five countries – Canada, Estonia, Ireland, Luxembourg and Norway – have increased their tax-to-GDP ratio since 2009, the post-financial crisis low-point for tax revenues in the OECD.
A total of 18 countries have reached or exceeded their pre-crisis high points.
In 2016, the largest increases in tax-to-GDP ratios were recorded in Greece (2.2 percentage points) and in the Netherlands (1.5 percentage points).