Tax revenues declined across the Organization for Economic Co-operation and Development (OECD) for the first time in a decade during 2019, but a much larger drop is expected in 2020 as economic activities suffer from the COVID-19 pandemic, the organization said on Thursday.
The tax revenue to GDP ratio – a figure indicating state tax revenues as percentage of gross domestic product – in OECD countries declined to 33.8% in 2019, a decrease of 0.1 percentage point since 2018.
The ratio of tax revenues to GDP was down in 15 OECD countries that were larger, on average, than the increases in the 20 remaining countries, the report showed.
The largest decline in 2019 occurred in Hungary by 1.7 percentage point. It followed by Iceland with 1.1 percentage point and Belgium and Sweden both with 1 percentage point.
Only one increase of over one percentage point was seen in Denmark, 2 percentage point in 2019.
The report also showed the corporate income taxes in the OECD have continued to increase, from 9.2% of total tax revenues on average in 2014 to 10% in 2018.
In 2018, however, average revenues from taxes on goods and services declined in OECD countries, although revenues from value-added tax (VAT) remained steady at 20.4%.
Pascal Saint-Amans, director of the OECD center for tax policy and administration, stressed that at some point when the health crisis has passed and the economic recovery is underway, governments will need to reconsider whether their tax systems are up to the challenges of the post-pandemic environment.
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