This publication is the eighth in the series Consumption Tax Trends. It presents information relative to indirect taxes in OECD member countries, as at 1 January 2009. Tables on VAT/GST rates and thresholds are updated as at 1 January 2010. Four countries became members of the OECD during 2010. This edition includes data for three new member countries: Chile, Israel and Slovenia. Data on Estonia is not included in this edition because they did not become a member until December 2010 and there was insufficient time to include the relevant information.
Consumption taxes form an important source of revenue for an increasing number of governments. They now account for 30% of all revenue collected by governments across the OECD. Value added taxes* (VAT) are the principal form of taxing consumption in 33 of the 34 OECD member countries (the United States continues to deploy retail sales taxes, albeit at the sub-federal level) and account for two thirds of consumption tax revenues. The remaining third is made up of specific consumption taxes such as excise duties.
Consumption Tax Trends 2010
Consumption taxes include, on one hand general consumption taxes, typically value added taxes (VAT and its equivalent, sometimes called Goods and Services Tax – GST) and retail sales taxes and on the other hand taxes on specific goods and services, consisting primarily of excise taxes, customs duties and certain special taxes.
Tendances des impôts sur la consommation 2010
Ce texte est un résumé de l’édition 2010 des Tendances des impôts sur la consommation. Le texte complet, les tableaux et les graphiques, sont uniquement disponibles en anglais.
In the OECD classification, "taxes" are confined to compulsory, unrequited payments to general government. They are divided into five broad categories: taxes on income (1000), profits and capital gains (2000); social security contributions (3000); taxes on payroll and workforce; property taxes (4000); and taxes on goods and services (5000) (OECD, Revenue Statistics 1965-2008).
Consumption Tax Topics
The spread of Value Added Tax (VAT,1 also called Goods and Services Tax – GST) has been the most important development in taxation over the last half century. Limited to less than ten countries in the late 1960s, it has now been implemented by more than 150 countries (Annex B). VAT now raises 20 per cent of the world’s tax revenue and affects about 4 billion people (Keen and Lockwood, 2007). The recognised capacity of VAT to raise revenue in a neutral and transparent manner has drawn all OECD member countries to adopt this broad-based consumption tax, except the United States, which continues to employ retail sales taxes at the state level (and below) rather than apply a federal consumption tax (see Chapter 1). Its neutrality principle towards international trade has also made it the preferred alternative to customs duties in the context of trade liberalisation.
Value Added Taxes Yield, Rates and Structure
It is probably unprecedented in the long history of taxes that a specific – and somewhat conceptually complex – tax mechanism has spread around the world in less than a half century. Limited to less than 10 countries in the late 1960s, Value Added Tax (VAT or, in several countries, Goods and Services Tax – GST),1 is today an essential source of revenue in more than 150 countries (Annex B).
Measuring Performance of VAT
As noted in Chapter 3, there is a wide diversity in the way countries have implemented VAT. Each country has a specific mix of rates, exemptions, thresholds, etc., derived from local historic, economic and political conditions. However, all governments seek to obtain the best yield from the tax, in particular at a time when many are seeking ways to address large fiscal deficits. Raising the standard VAT rate is often considered to be the easiest way to increase revenues from the tax. However, this has its own limitations, in particular in countries where the rate is already relatively high. Improving the performance of the tax is another option. This includes broadening the tax base, a more limited use of reduced rates and exemptions, more efficient tax administration and better compliance.
Selected Excise Duties in OECD Member Countries
Taxes on specific products were introduced long before general consumption taxes. Excise taxes have existed since ancient Egypt where a tax was levied on cooking oil. The Romans also developed specific taxes, i.e. on the sale of slaves. Taxes on salt, alcohol and other "luxury products" existed in many countries for centuries. In modern history, the term "excise" has been used since the 17th Century (originally in the Netherlands) to designate taxes imposed on certain goods. Unlike customs duties, excise taxes are normally levied on consumption of specific goods whether domestically produced or imported.
Motoring has been an important source of tax revenue for a long time. All member countries rely heavily on a range of tax instruments to ensure significant budgetary receipts from both private and commercial road users. Vehicle taxation in its widest definition represents a prime example of the use of the whole spectrum of consumption taxes. Over the last fifteen years, these taxes have been adapted to influence consumer behaviour, mainly to achieve environmental objectives.
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