OECD Tax Policy Studies

1990-0538 (online)
1990-0546 (print)
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This series consists of studies analysing the effects of tax policies that have occurred in the past or might be considered for the future. Its primary purpose is to assist policy makers in designing tax policies that are suited to their objectives.

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Tax Ratios: A Critical Survey

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07 Nov 2001
9789264195622 (PDF) ;9789264195455(print)

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Tax ratios derived using aggregate data - also known as implicit tax rates - have attracted increased attention from policymakers and analysts as a possible approach to measuring average effective tax rates on labour, capital, households, corporations and consumption. This study reports on conceptual and practical difficulties encountered in the measurement of average tax rates using aggregate data (e.g., National Accounts and Revenue Statistics).

To examine the robustness of previous studies on tax ratios, the existing indicators are re-calculated for an expanded sample of countries and over an extended time period, and the results are compared with those derived under an alternative suggested methodology. The work finds that most tax ratios reported in the literature suffer from a number of flaws, and highlights measurement problems that are much broader than discussed in the literature. The identification of substantial shortcomings with these measures is useful, given the interest in their use for policy purposes. The message of this study is that policymakers should be aware of the measurement problems underlying average tax rates based on aggregate data, should they be fielded to shape public policy debates.

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Table of Contents

Executive Summary
1. Introduction
2. Tax Ratios in the Literature: An Overview
3. Tax Ratios: Methodology of the Mendoza et al (1994) Study
4. Tax Ratios: A Comparison
-Personal Income Tax Ratios
-Labour Income Tax Ratios
-Capital Income Tax Ratios
-Corporate Income Tax Ratios
-Consumption Tax Ratios
5. Methodological and Practical Problems
-General Comments
-Fundamental Issues
-Smaller Problems
6. Suggestions for Improvement
7. New Calculations of Tax Ratios
-The Mendoza et al (1994) Methodology
-New Calculations Folllowing Our Suggested Methodology
8. Concluding Remarks
A. Data
B. Remarks to the Calculations Underlying the Results in Section 7
Country Reports
-The Netherlands
-United Kingdom

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