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Corporate tax revenues falling, all burden on individuals

Staff writer |
Corporate tax revenues have been falling across OECD countries since the global economic crisis, putting greater pressure on individual taxpayers.

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This is done to ensure that governments meet financing requirements, according to new data from the OECD’s annual Revenue Statistics publication.

Average revenues from corporate incomes and gains fell from 3.6% to 2.8% of gross domestic product (GDP) over the 2007-14 period. Revenues from individual income tax grew from 8.8% to 8.9% and VAT revenues grew from 6.5% to 6.8% over the same period.

These efforts are focused on the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project, which provides governments with solutions for closing the gaps in existing international rules that allow corporate profits to « disappear » or be artificially shifted to low/no tax environments, where little or no economic activity takes place.

Revenue Statistics shows that the average tax burden across OECD countries increased to 34.4% of GDP gross domestic product (GDP) in 2014.

The increase of 0.2 percentage points in 2014 continues the recent upward trend, as the OECD average tax burden has increased in every year since 2009 when the ratio was 32.7%. The tax burden is measured by taking the total tax revenues received as a percentage of GDP.

While the increase in tax ratios between 2009 and 2014 is due to a combination of factors, the largest contributors have been increases in revenue from VAT and taxes on personal incomes and profits, which combine to account for around two-thirds of the increase. Revenues from social security contributions and property taxes account for the majority of the remainder.

Discretionary tax changes have played an important role, as many countries have raised tax rates or broadened tax bases or both. The OECD average standard VAT rate has increased to a record high, rising from 17.7% in 2008 to 19.2% in 2015. Twenty-two of 34 OECD countries raised top personal income tax rates between 2008 and 2014.

The average OECD tax-to-GDP ratio in 2014 was 0.3 percentage points higher than the pre-crisis level of 34.1% in 2007, and has surpassed the previous high of 34.2%, which was recorded in 2000.

The average revenues from corporate incomes and gains fell from 3.6% to 2.8% of GDP over the same period. This decline was offset by an increase in social security contributions, from 8.5% to 9.2% of GDP, and a smaller increase in revenues from VAT.


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