On 30 November 2022 the OECD released Consumption Tax Trends 2022, an annual publication setting out comparative data on consumption taxes and trends in consumption tax policy in OECD countries. The data indicate that as e-commerce increases the OECD countries have introduced reforms to collect VAT more efficiently on online transactions and create a level playing field with traditional business models.
The average consumption tax revenues in the OECD in 2020 were 9.9% of GDP, a decrease by comparison to the previous year. The share of consumption taxes in total tax revenue also went down from the previous year, from 30.6% in 2019 to 30.0% in 2020. The main reason for this decline was that the taxes on specific goods and services, such as excises on tobacco, alcohol and fuel, decreased on average as a share of total taxation.
The statistics show that value added tax (VAT) accounted for 20.2% of total taxes in the OECD on average in 2020. Excise duties accounted for 6.9% of total tax revenues on average in that year.
Consumption tax-to-GDP ratios
In the years from 2018 to 2020 the consumption tax-to-GDP ratios declined in 28 out of the 38 OECD countries. However, consumption taxes still produced more than 40% of total taxes in Chile, Colombia, Hungary, Latvia and Turkey and accounted for more than 50% of total tax revenue in Chile. In Japan, Switzerland and the US, by contrast, consumption taxes accounted for less than 20% of total tax revenue.
The VAT revenues as a share of GDP were on average around 6.7% in OECD countries in 2020, around the same level as in 2018 and 2019. VAT accounted for 20.2% of total tax revenues on average in the OECD. Revenues from taxes on specific goods and services, mainly excise taxes, declined to 3.0% of GDP in 2020 and also declined as a percentage of total tax revenue, to 9.1% in 2020.
VAT rates
The standard rate of VAT in OECD countries was 19.2% in 2022. Germany and Ireland introduced a temporary reduction of their standard VAT rate in 2020 as part of their economic stimulus packages in the pandemic, but later reversed the measures. Most of the OECD countries introduced reduced or zero rates for supplies and imports of medical equipment and sanitary products and for healthcare services where they were not already subject to exemption or reduced rates. Some countries introduced temporary VAT rate reductions to boost consumption or support specific sectors such as tourism or hospitality.
Online supplies
All OECD countries with a VAT had committed to the OECD standards for the collection of VAT on online sales of services and digital products from non-resident e-commerce vendors. Also, most OECD countries had implemented reporting obligations for electronic transactions, requiring detailed information on individual taxable transactions to be transmitted in an electronic format. The OECD countries were continuing with the progressive digitalisation of invoices, with electronic invoicing permitted in all OECD countries, though it was only mandatory in 11 of the OECD countries.
Excise taxes
The OECD countries use excise taxes to raise revenue and to influence consumer behaviour in the case of products considered harmful to health or the environment. There has been a resurgence of interest in specific taxation of alcoholic beverages in recent years to influence consumer behaviour and promote public health.
Also, the significant tobacco consumption, low elasticity of demand for tobacco products and the small number of producers make tobacco products an attractive target for excise and other taxation. The total tax burden on cigarettes was more than 60% of the consumer price in almost all OECD countries and above 75% in 21 of the countries.
