OECD study shows slowing in indirect taxes

The latest study by the
for Economic Co-operation and Development
(OECD) shows the average tax
burden in OECD countries, measured as the ratio of tax to gross domestic product
(GDP), is back up to the same levels as in 2000 after a brief reduction between
2001 and 2004. But over a 40-year time span, there was no widespread shift in
the tax burden from direct to indirect taxes, contrary to some public
perceptions, because growth in VAT revenues has been offset by a reduction in
specific consumption taxes, mainly excise duties.

UK had the 16th greatest share of indirect tax among the OECD countries,
behind the Netherlands, Finland and Czech Republic, indirect tax accounting for
about 30% of revenue and VAT just less than 20%. The highest share of indirect
tax was in Mexico, at close to 60%, and the lowest share was in the US, which
only has retail sales tax, at less than 20%.

Between 1965 and 2006, as VAT spread from three to 29 of the 30 OECD
countries, the revenue share of VAT and sales taxes in all OECD countries rose
from 13.6% to 18.9%, while total revenue from all taxes on consumption fell from
38.4% to 31.9% because of the drop in revenues from excise duties and other
specific taxes.

The sharpest rise in the 40-year period was in social security contributions
– up from 17.6% to more than one-quarter of total revenue from taxes; followed
by corporate income tax – up from 8.8%, to 10.3%. All other taxes accounted for
a falling share of total tax revenue – personal tax, down from 26.2% to 24.6%;
followed by property tax, down from 7.9% to 5.6% and payroll tax, down from 1%,
to 0.8%.

Further reading:

A code of taxation is vital for accountants

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