Tax

We Are Paying More Tax – But Less Than We Used To

Everyone’s paying more tax despite most countries enduring wage freezes, job losses and stagnating economies.

Countries are collecting more tax as a percentage of GDP – although the average figure of 34% for 2011 is still below the peak of 35.1% in 2007 before the downturn gripped the world economy.

The data comes from 29 developed countries for 2011 and was collated by the Organisation of Economic Cooperation and Development (OECD), www.oecd.org

In these nations, tax revenues were up in 20 and dropped in six.

Chile, France, the Czech Republic and Germany saw the largest increases in 2011, while Hungary, Estonia and Sweden registered the largest falls.

Largest tax drop

Increasing tax ratios are due to a combination of factors, explains the OECD.

“With a progressive tax regime, economic recovery led to tax revenues rising faster than GDP and at the same time many countries raised tax rates and/or broadened bases. In 2008 and 2009, the declining ratios reflected the severity of the recession and that some countries responded by cutting tax rates,” said secretary-general Angel Gurría.

“This increase in 2011 tax revenues supports fiscal consolidation efforts in many countries. However, if OECD countries want to pursue these long-term strategies successfully, the increase in tax revenue must go hand in hand with efforts to restore long-term growth prospects, strengthen economic activity and create jobs.”

Eurozone nations suffering from recession and the debt crisis – Greece, Ireland, Portugal and Spain – saw a sharp fall in tax revenues in 2008 and 2009, but a small recovery in revenues since then.

The largest fall in tax revenues was in Hungary, with a decline from 37.9% of GDP to 35.7%. Estonia and Sweden had drops of more than 1%.

British and US taxes

Chile (1.8%) and France (1.4%) had the biggest tax ratio increases between 2010 and 2011.

At 48.1%, Denmark has the highest tax-to-GDP ratio among OECD countries, followed by Sweden (44.5%), while Mexico (19.7%) and Chile (21.4%) have the lowest.

The tax to GDP ratio in Britain fell from 36.4% in 2000 to 34.4% in 2003 and then climbed to 36.3% by 2006 before dropping to 34.2% in 2009 – and rising again to 35.5% in 2011. The figure has floated around the OECD average for the whole period.  In 2010, the measure was 34.9%, 1 percentage point above the OECD figure of 33.8%.

The US increase matched the OECD average, from 24.8% of GDP in 2010 to 25.1% in 2011.

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