Personal tax rising as corporate rates fall, OECD finds

3 Dec 15

Corporate tax revenues have been falling across OECD countries and individuals are being left to foot the bill, the economic think-tank has found.

The group’s annual Revenue Statistics publication found revenues from corporate incomes fell from 3.6% to 2.8% of gross domestic product from 2007 to 2014, while income tax, VAT and other individual taxes grew over the same period.

Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration, said: “The great majority of all tax rises seen since the crisis have fallen on individuals through higher social security contributions, value added and income taxes.

“This underlines the urgency of efforts to ensure corporations pay their fair share. Corporate taxpayers continue to find ways to pay less, while individuals end up footing the bill.”

The OECD reported the tax ratio in the 34 OECD countries – the amount of tax collected as a percentage of gross domestic product –grew on average from 32.7% in 2009 to 34.4% in 2014. This is the highest since the OECD began measuring tax ratios in 1965.

The report said that many countries have raised tax rates, broadened tax bases or both. Overall, 22 OECD countries had raised their top personal income tax rates between 2009 and 2014.

Income tax, which rose from 8.8% to 8.9% as a percentage of GDP over the period, and VAT, which grew from 6.5% to 6.8%, were the largest contributors to the rise, accounting for about two-thirds of the increase.

Revenues from social security contributions, which rose from 8.5% to 9.2%, and property taxes accounted for the majority of the remainder.

Between 2007 and 2014, Greece, Denmark and Turkey all saw increases of more than 4 percentage points.

Of the 0.2% increase in the tax burden in 2013/14 period alone, about 80% of this rise was attributed to a combination of consumption taxes and taxes on personal income and profits.

Denmark (3.3%), Iceland (2.7%), Greece (1.5%), Estonia (1.1%) and New Zealand (0.1%) saw the highest increases in tax ratio in 2013/14. There were 14 countries where the tax ratios fell between in 2013/14, with the largest drops seen in Norway (-1.4%), Czech Republic (-0.8%) and Luxembourg and Turkey, where the ratio fell -0.6% for both.

Tax revenues for the year remained below pre-crisis levels in three countries according to the OECD – Israel, Norway and Spain.

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