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OECD: Tax revenues continue to rise in advanced economies

Tax revenues collected in advanced economies have continued to grow after reaching an all-time high last year, with taxes on labour and consumption representing an increasing share of the total, according to research by the Organisation for Economic Co-operation and Development (OECD).02 Dec 2016

The average tax-to-GDP ratio across OECD countries rose slightly to 34.3% in 2015 compared to 34.2% in 2014, the OECD said. This is the highest level since the organisation's Revenue Statistics publication began in 1965, it said.

The increase was seen in 25 of 32 OECD countries, the OECD said.

A second report, Consumption Tax Trends 2016, found that VAT is the largest source of consumption tax revenues in the OECD. VAT reached 6.8% of GDP and 20.1% of total tax revenue in 2014, its highest ever level, the OECD said. Revenues from VAT rose as a percentage of GDP in 22 of the 34 OECD countries that operate a VAT and fell slightly in five countries, compared to 2012.

Tax revenues are shifting towards labour and consumption taxes, the OECD said. The combined share of personal income taxes, social security contributions and value-added taxes was higher in 2014 than at any point since 1965, at an average of 24.3% of GDP in 2014, it said.

Personal income tax increased to 24% of total revenue in 2014 compared to a pre-crisis level of 23.7% in 2007. The share of corporate taxes to total revenue in 2014 was 8.8%, compared to 11.2% in 2007. 

The largest increases in the overall tax-to-GDP ratio from 2014 to 2015 were in Mexico and Turkey, with strong increases in Estonia, Greece, Hungary and the Slovak Republic. The largest falls were in Ireland, Denmark, Iceland and Luxembourg.

 The fall in Ireland was because of exceptionally high GDP growth, which was mainly due to transfers of intangible assets into the Irish jurisdiction by a number of multinational enterprises, the OECD said.

Excluding Ireland, the average OECD tax-to-GDP ratio in 2015 was 34.6%, it said.