On 3 December 2020 the OECD released the annual Revenue Statistics publication with the results of a survey of OECD countries. The data indicates that the average tax to GDP ratio in the OECD countries surveyed fell slightly to 33.8% in 2019.

The statistics reveal that there is still diversity in tax-to-GDP ratios among OECD countries, ranging from 16.5% in Mexico to 46.3% in Denmark.

In 2019 the largest decreases in revenue were seen in Hungary (1.7 percentage points); Iceland (1.1 percentage points); Belgium and Sweden (both 1.0 percentage points). The fall in revenue in Hungary was partly due to a fall in the corporate tax revenue due to the removal of a compulsory tax advance supplement on business taxes.

The most significant increase in tax revenue in the year was recorded in Denmark, where revenues increased by 2 percentage points.

Tax Structure

The statistics for tax structure are based on 2018, the last year for which final figures are available for all the surveyed countries. These indicate that in 2018 the largest contribution to tax revenue came from social security contributions, which amounted to 25.7% of the total tax revenue. Personal income taxes brought in a further 23.5% and value added tax (VAT) accounted for 20.4% of total tax revenues. The remaining tax revenue was provided by other consumption taxes (12.3%); taxes on corporate income (10%); property taxes (5.6%) and residual taxes.

The average share of income taxes in total tax revenues increased by 0.4% between 2017 and 2018, mainly due to increases in corporate income taxes which have been growing in recent years as a proportion of total tax revenue and reached a contribution of 10% in 2018. The contribution made by corporation tax revenues is however expected to decrease as a result of the economic effects of the Covid-19 pandemic.

The average revenues from indirect taxes on goods and services fell in 2018 in OECD countries. Although revenues from VAT were similar to those in the preceding period at 20.4%, revenues from excise taxes decreased by 0.4 percentage points to 7.2% in 2018.

Consumption Tax Revenues in the Pandemic

The 2020 issue of Revenue Statistics includes a special feature on consumption tax revenues in the Covid-19 pandemic. This notes that VAT systems are affected by economic shocks especially when the crisis directly hits private consumption more than investment. The pandemic has directly affected private consumption as a result of the lockdowns and forced closures of businesses in a number of areas including tourism and hospitality. There has been increased spending by consumers on household necessities and increased government spending, but as these areas of spending are often VAT exempt the VAT revenues are unlikely to increase in line with the increases in government spending.

Consumption taxes will be an important tool in bringing about economic and fiscal recovery after the pandemic. Governments will need to carefully consider to the structure of their VAT systems to ensure that the revenues are resilient in future economic downturns, taking into account the behavioural and distributional impact of any proposed changes.