OECD analysis highlights expanding reliance in APAC of indirect taxes
The OECD’s latest “Revenue Statistics in Asia and the Pacific 2025” report highlights the growing importance of indirect taxes — especially Value Added Tax (VAT) or Goods and Services Tax (GST) — across the Asia-Pacific region. Based on data from 37 economies between 2010 and 2023, the report underscores that taxes on goods and services continue to dominate the fiscal landscape. In 2023, these taxes accounted for 50.2% of total tax revenue, aligning closely with averages in Africa (51.3%) and the Latin America and Caribbean (LAC) region (47%), but notably exceeding the OECD average of 31.5%.
VAT biggest source of tax revenues in region
VAT remains the single largest contributor, making up 25.8% of total tax revenues in Asia-Pacific in 2023. While this is slightly lower than Africa’s (27%) and LAC’s (28.5%) shares, it stands well above the OECD average of 20.8%. Other taxes on goods and services contributed an additional 24.3%, more than double the OECD benchmark.
The report illustrates VAT’s pivotal role in smaller economies. For example, in the Cook Islands, VAT alone generated over half of all tax revenue. Niue saw a dramatic rise in VAT receipts in 2023, driving its tax-to-GDP ratio up by more than four percentage points — the highest regional increase. Likewise, the Maldives experienced a surge in VAT revenue following tax rate hikes on both daily goods and tourism, pushing its tax share of GDP up over three percentage points. Azerbaijan and the Cook Islands also recorded strong VAT growth due to economic expansion and improved tax enforcement.
Significant variation in efficiency of country VAT regimes
The VAT Revenue Ratio (VRR) — which measures how effectively VAT is collected — revealed significant disparities. Timor-Leste had the lowest VRR at 0.10, indicating it captures only a fraction of potential VAT, whereas New Zealand, with its broad-based system and no reduced rates, scored a near-perfect 0.97.
While tax-to-GDP ratios climbed for most countries for the third consecutive year, overall growth slowed in 2023 due to weaker economic activity. Nevertheless, both tax and non-tax revenues rose as a share of GDP in many economies.
In sum, the OECD’s analysis confirms that VAT is a cornerstone of fiscal policy in Asia-Pacific, although its efficiency and impact vary widely due to differences in tax structures, exemptions, administrative capacity, and economic bases. As these economies work to strengthen revenue systems and support post-pandemic recovery, refining VAT design and boosting compliance remain critical priorities.
