Executive summary

Tax-to-GDP ratios in Asian and Pacific economies

In 2017, tax-to-GDP ratios in the Asia and Pacific region ranged from 11.5% in Indonesia to 32.0% in New Zealand. The tax-to-GDP ratio refers to total tax revenue, including social security contributions, as a percentage of gross domestic product (GDP). All economies in this publication had lower ratios in 2017 than the OECD average of 34.2%, whereas eight of the economies included in this publication had tax-to-GDP ratios above the Latin American and the Caribbean (LAC) average of 22.8%.

Six of the eight Asian countries covered in this publication had a tax-to-GDP ratio below 18% (the exceptions being Japan and Korea) whereas six of the nine Pacific economies had a tax-to-GDP ratio above 24% (the exceptions being Papua New Guinea, Tokelau and Vanuatu).

Since 2016, nearly two-thirds of the economies included in this publication for which 2017 data is available experienced increases in their tax-to-GDP ratios. The largest increases were seen in Fiji and Vanuatu (1.7 percentage points and 1.9 percentage points, respectively). Three other economies (Kazakhstan, the Solomon Islands and Singapore) had increases greater than 1.0 percentage point. Most of the decreases were comparatively small: Malaysia and Papua New Guinea experienced the largest decreases between 2016 and 2017 (a decrease of 0.7 percentage points for both countries).

Eleven economies included in the publication have increased their tax-to-GDP ratios over the last decade, with the exception of Australia, Indonesia, Kazakhstan, Papua New Guinea, New Zealand and Vanuatu. The highest increases between 2007 and 2017 were observed in Fiji and the Solomon Islands (4.4 and 4.5 percentage points, respectively), primarily due to increases in revenue from income tax and other taxes on goods and services in both countries. Across the same period, Kazakhstan and Papua New Guinea experienced the largest decreases in their tax-to-GDP ratios (9.7 and 7.0 percentage points, respectively), driven in both cases by decreases in corporate income tax (CIT) revenues. These are attributed to the impact of declining prices of natural resources (during the global financial crisis and in 2014-15) on the profitability of companies in the mining and oil sector in both countries, as well as to a reduction of CIT rates in Kazakhstan.

Tax structures in Asian and Pacific economies

Economies in Asia and the Pacific rely predominantly on goods and services taxes and on income taxes. In nine economies in this publication (the Cook Islands, Fiji, Indonesia, Kazakhstan, the Philippines, Samoa, the Solomon Islands, Thailand and Vanuatu), taxes on goods and services accounted for the largest share of tax revenues in 2017. Within goods and services, VAT/GST is an important and increasing source of revenues in most economies. VAT/GST revenue ranged from 12.9% of total tax revenue in Australia (2016 figure) to 44.4% of total tax revenue in the Cook Islands (the Solomon Islands and Tokelau do not impose VAT/GST) and was higher as a share of total taxes in the Pacific compared to Asian economies. In the Pacific economies that apply a VAT/GST, it accounted for more than 28% of tax revenues, except in Australia and Papua New Guinea. In contrast, VAT/GST revenue generated less than 25% of total tax revenue in 2017 in all Asian countries except Indonesia.

Income taxes provided the main share of tax revenues in the eight remaining countries with the exception of Japan, where social security contributions (40.4% of total tax revenue, 2016 figure) represented the largest source. Across all economies with the exception of Tokelau (which does not impose CIT) and Vanuatu (which does not impose income taxes), revenues from CIT ranged from 9.1% of total tax revenue in Samoa and 41.5% of total tax revenue in Malaysia in 2017. Three countries with the highest shares of revenue from CIT (accounting for over 26% of total tax revenue) include Kazakhstan, Papua New Guinea and Malaysia. Each is highly reliant on revenues from natural resources, especially the oil and mining sector. In 2017, all Asian countries except Indonesia, Japan and Korea were more reliant on CIT revenues than revenues from personal income tax, whereas the reverse was observed for the Pacific economies (with the exception of Fiji).

Non-tax revenues in selected Pacific economies

This publication includes data on non-tax revenues for five Pacific economies (the Cook Islands, Papua New Guinea, Samoa, Tokelau and Vanuatu). In 2017, non-tax revenues as a percentage of GDP were significant for the Cook Islands, Tokelau and Vanuatu and lower than 6% of GDP in Papua New Guinea and Samoa.

Grants were an important source of revenue in 2017 for all economies for which non-tax revenues are presented. In each economy they exceeded 30% of total non-tax revenues and they were the main source of non-tax revenues for the Cook Islands (65.7%), Papua New Guinea (59.9%), Samoa (51.1%) and Vanuatu (52.2%). Property-related income was the main source of non-tax revenues for Tokelau (62.6%) but also played an important role in the Cook Islands (25.9%) and Papua New Guinea (35.0%); in the Cook Islands and Tokelau, the majority of this income was from fishing rents, while mining dividends were the main contributor in Papua New Guinea.

Special feature: Tax administration operations

A special feature explores tax administration operations across Asian and Pacific economies, drawing on A Comparative Analysis of Tax Administration in Asia and the Pacific 2018 Edition (ADB, 2018) to summarise the recommended and observed features of key aspects of the common set of functions undertaken by all revenue bodies in the region. These include registration and identification of taxpayers, taxpayer services, tax return and tax payment processing, verification programmes, dispute resolution, and tax payment collection including enforced return filing and debt collection, and are fundamental to a well-functioning tax system.