Corporate tax revenues have been falling across OECD countries since the global economic crisis, putting greater pressure on individual taxpayers to ensure that governments meet financing requirements, according to new data from the OECD's annual Revenue Statistics publication.
Average revenues from corporate incomes and gains fell from 3.6% to 2.8% of gross domestic product (GDP) over the 2007-14 period. Revenues from individual income tax grew from 8.8% to 8.9% and VAT revenues grew from 6.5% to 6.8% over the same period.
"Corporate taxpayers continue finding ways to pay less, while individuals end up footing the bill," said Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration. "The great majority of all tax rises seen since the crisis have fallen on individuals through higher social security contributions, value added taxes and income taxes. This underlines the urgency of efforts to ensure that corporations pay their fair share."
These efforts are focused on the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project, which provides governments with solutions for closing the gaps in existing international rules that allow corporate profits to « disappear » or be artificially shifted to low/no tax environments, where little or no economic activity takes place.
Revenue Statistics shows that the average tax burden across OECD countries increased to 34.4% of GDP gross domestic product (GDP) in 2014. The increase of 0.2 percentage points in 2014 continues the recent upward trend, as the OECD average tax burden has increased in every year since 2009 when the ratio was 32.7%. The tax burden is measured by taking the total tax revenues received as a percentage of GDP.
While the increase in tax ratios between 2009 and 2014 is due to a combination of factors, the largest contributors have been increases in revenue from VAT and taxes on personal incomes and profits, which combine to account for around two-thirds of the increase. Revenues from social security contributions and property taxes account for the majority of the remainder.
Discretionary tax changes have played an important role, as many countries have raised tax rates or broadened tax bases or both. The OECD average standard VAT rate has increased to a record high, rising from 17.7% in 2008 to 19.2% in 2015. Twenty-two of 34 OECD countries raised top personal income tax rates between 2008 and 2014.
The average OECD tax-to-GDP ratio in 2014 was 0.3 percentage points higher than the pre-crisis level of 34.1% in 2007, and has surpassed the previous high of 34.2%, which was recorded in 2000. The average revenues from corporate incomes and gains fell from 3.6% to 2.8% of GDP over the same period. This decline was offset by an increase in social security contributions, from 8.5% to 9.2% of GDP, and a smaller increase in revenues from VAT.
This year's edition also includes a special chapter on the impact on the measurement of tax to GDP ratios of the move to the 2008 System of National Accounts (SNA).
Key findings:
- Compared with 2013, the average tax burden in OECD countries increased by 0.2 percentage points to 34.4% in 2014. This followed a rise of 1.5 percentage points between 2009 and 2013, reversing the decline from 34.1% to 32.7% between 2007 and 2009. The 2014 figure is the highest ever recorded OECD average tax to GDP ratio since the OECD began measuring the tax burden in 1965.
- The ratio of tax revenues to GDP rose in 16 of the 30 OECD countries for which 2014 data are available, compared with 2013, and fell in 14. Between 2009 and 2014, there were increases for 22 of these countries, a decline in seven, with one unchanged.
- About 80% of revenue increases over the 2013-14 period are attributed to a combination of consumption taxes and taxes on personal incomes and profits. This combination also accounts for two-thirds of the rise in revenues between 2009 and 2014.
- The largest tax ratio increases between 2013 and 2014 were in Denmark (3.3 percentage points) and Iceland (2.8 percentage points). Other countries with substantial rises were Greece (1.5 percentage points), Estonia (1.1 percentage points) and New Zealand (1.0 percentage point).
- The largest falls were in Norway (1.4 percentage points) and Czech Republic (0.8 percentage points). Luxembourg and Turkey showed falls of 0.6 percentage points.
- Underlying the OECD average, individual countries show widely differing trends. For example, Spain recorded a fall of 3.3 percentage points between 2007 and 2014, while Greece recorded an increase of 4.7 percentage points.
- Historically, tax-to-GDP ratios increased through the 1990s, to a peak OECD average of 34.2% in 2000. They fell slightly between 2001 and 2004, but then rose again between 2005 and 2007 to an average of 34.1% before falling back sharply during the crisis.
- Denmark has the highest tax-to-GDP ratio among OECD countries (50.9% in 2014), followed by France (45.2%) and Belgium (44.7%).
- Mexico (19.5% in 2014) and Chile (19.8%) have the lowest tax-to-GDP ratios among OECD countries. They are followed by Korea, which has the third lowest ratio among OECD countries at 24.6%, and the United States at 26.0%.
- Compared with 2007 (pre-crisis) tax to GDP ratios, the ratio in 2014 was still down by 3 percentage points or more in three countries – Israel, Norway and Spain. The biggest fall has been in Spain - from 36.5% in 2007 to 33.2% of GDP in 2014 (3.3 percentage points).
- The tax burden in Greece increased from 31.2% to 35.9% between 2007 and 2014. Two other countries; Denmark and Turkey showed increases of more than 4 percentage points over the same period.
- Data for 2013, the latest year for which a breakdown of revenues by category of tax is available for all OECD countries, show that revenues from personal and corporate income taxes are now recovering following the sharp falls of 2008 and 2009. However, the share of these taxes in total revenues remains at 33.7%, somewhat below their 36% share in 2007. On the other hand, the share of social security contributions has increased by 1.6 percentage points to an average of 26.1% of total revenue.
- In 2013, an average of 24% of revenues is attributed to sub-central levels of government in Federal countries in the OECD - about two thirds of this is attributed to State and one third to local governments. The same applies to Spain, which is classified as a regional country in the publication. In the 25 unitary countries, about 12% of revenues are attributed to local governments.
Bron: OECD
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