Executive Summary

Since 1995, tax levels and tax structures in OECD countries have converged around a higher average tax-to-GDP ratio and an average tax structure that is more reliant on value-added taxes, social security contributions, and corporate income taxes, while less reliant on personal income taxes and other forms of taxes and goods and services. In 2017, these trends continued, with the OECD average tax-to-GDP ratio continuing its steady increase to a high of 34.2%.

Taxes are defined as compulsory, unrequited payments to general government. They are unrequited in that the benefits provided by governments to taxpayers are not normally allocated in proportion to their payments. Taxes are classified by their base: income, profits and capital gains; payroll; property; goods and services; and other taxes. Compulsory social security contributions (SSCs) paid to general government are also treated as taxes. Revenues are analysed by level of government: federal or central; state; local; and social security funds. Detailed information on the classifications applied is set out in the Interpretative Guide in Annex A.

Tax levels in 2017

Across OECD countries, tax-to-GDP ratios in 2017 ranged from 16.2% in Mexico to 46.2% in France, with 20 countries within five percentage points of the OECD average of 34.2%. Between 2016 and 2017, the OECD average tax-to-GDP ratio has increased 0.2 percentage points, from 34.0% to 34.2%. This continues the consistent increase in the average OECD tax-to-GDP ratio since the financial crisis.

An increase in tax-to-GDP ratios from 2016 to 2017 is also observed in 19 of the 34 countries for which preliminary 2017 data is available. In all of these countries, the increase was due to nominal tax revenues increasing more than the nominal increases in GDP. The increase in the tax-to-GDP ratio was largest in Israel, due to higher revenues from taxes on income, and the United States, due to higher property tax revenues, with no other increases above one percentage point in this period.

Fifteen countries experienced a decrease in tax-to-GDP ratios in 2016 relative to 2015. The falls were also typically small, with a decrease exceeding one percentage point in only Iceland and Hungary. In Iceland, the fall was due to the impact of one-off stability contributions in 2016; whereas in Hungary, the fall was due to decreases in taxes on income and profits and a decrease in taxes on goods and services . Decreases were also seen in Chile, Sweden, Denmark, Italy, Turkey, Slovenia, Austria, Mexico, Norway, Canada, Ireland, Finland and Estonia; and in all cases were due to tax revenues increasing less than GDP.

Twenty-two OECD countries reported tax-to-GDP ratios in 2017 that were higher than those in 2007, with the greatest increases seen in Greece and Mexico. Among the remaining 12 countries, tax levels in 2016 remained more than three percentage points lower in Ireland and Norway.

Tax structure in 2016

In 2016, SSCs amounted to the largest share of tax revenues in the OECD, at just over one-quarter (26.0%) of total revenues, and together with personal income taxes (23.5%) the two categories amounted to nearly one-half of tax revenues in OECD countries on average. Value-added taxes accounted for a further one-fifth of total revenues (20.0%). Other consumption taxes and taxes on corporate income accounted for smaller shares of tax revenues (12.5% and 9% respectively), with property taxes (6.5%) and residual taxes accounting for the remaining share.

Since 2015, the biggest change in the tax structure occurred in the composition of taxes on income and profits, where the share of personal income taxes decreased by 0.3 percentage points (from 24.1 to 23.8 of total revenues) and the share of corporate income taxes increased by 0.2 percentage points (from 8.8 to 9.0% of total revenues). Changes in other categories were all less than 0.1 percentage point, with the result that the OECD average structure stayed relatively constant in 2016, with the exception of the shift away from personal toward corporate income taxes.

Changes by level of government

Tax revenues at different levels of government remained stable in 2016 relative to 2015, both on an OECD average basis and in individual countries. The federal share of revenues in 2015 remained at 53.2% of general government revenue in federal countries and at 63.5% in unitary countries. In federal countries, 25.4% of revenues were received at subnational level on average (ranging from 4.6% in Austria to 50.2% in Canada), with roughly two-thirds of revenues being received by state governments and one-third by local governments. In unitary countries, the share of local government revenues was 11.4% on average, ranging from less than 1.5% in the Czech Republic, Estonia and Lithuania, to 35.4% in Sweden.

Convergence in OECD tax levels and structures

A special feature in this report measures the convergence of tax levels and tax structures in OECD countries, demonstrating that the OECD average tax-to-GDP ratio in 2016 is more representative than it has been at any point in the last twenty years. Since 1995, the longest period for which data is available for all OECD countries, the OECD average tax-to-GDP ratio has increased from 33.0% to 34.0% in 2016, while dispersion of country tax-to-GDP ratios around this mean has decreased.

Similarly, tax structures in most OECD countries have converged toward the OECD average tax structure, which has become more reliant on value-added taxes, social security contributions, and corporate income taxes; and which has moved away from taxes on personal income and other forms of taxes on goods and services. In 2016, the countries with the greatest difference in tax structures from the OECD average were Chile, New Zealand, Denmark, Australia and the United States; whereas the smallest differences were observed in Portugal, Norway, Finland, Luxembourg and Spain.

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