Consumption Taxes Make Up a Majority of Developed Nations' Revenues
May 4, 2015
Developed countries raise tax revenue through a mix of individual income taxes, corporate income taxes, social insurance taxes, taxes on goods and services and property taxes. However, the extent to which an individual country relies on any of these taxes can differ substantially.
These policy and economic differences among Organization for Economic Co-operation and Development (OECD) countries have created differences in how they raise tax revenue.
Sources of government revenue across the OECD include:
- OECD countries rely heavily on consumption taxes, such as the value added tax, and social insurance taxes, such as the payroll tax.
- The United States relies heavily on the individual income tax, at 37.7 percent of total government tax revenue.
- On average, OECD countries collect little from the corporate income tax (8.5 percent of total tax revenue).
According to the most recent data from the OECD (2012), consumption taxes are the largest source of tax revenue for OECD countries. On average, countries raise approximately 32.8 percent of their tax revenue from consumption taxes. This is unsurprising given that all OECD countries (except the United States) levy value-added taxes at relatively high rates.
The next significant source of tax revenue is social insurance taxes. OECD countries raised approximately 26.2 percent of total tax revenue from social insurance taxes.
Individual income taxes accounted for 24.5 percent of total tax revenue across the OECD. Corporate income taxes accounted for only 8.5 percent of total tax revenue. Property taxes raised the least across the OECD, accounting for 5.4 percent of total tax revenue.
Source: Kyle Pomerleau, "Sources of Government Revenue Across the OECD, 2015," Tax Foundation, April 30, 2015.
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