OECD figures show other taxes’ growth outstrips VAT; but is this because of attractions of VAT during crises?
The OECD’s annual “Revenue Statistics 2023: Tax Revenue Buoyancy in OECD Countries” shows that VAT’s growth in nearly 40 countries has slowed. The average share of VAT/GST/Sales Tax as a share of total tax revenues has fallen from 34% to 32%.
This is down to much faster rising income taxes rather than surveyed countries turning away from VAT. Plus, COVID and inflation emergency VAT cuts were at a peak in 2022, squeezing the indirect tax numbers. Last year, the OECD questioned blanket VAT cuts’ efficacy at aiding economies in dips. But finance ministries around the world applied liberal VAT cuts during the COVID and inflation spike crises as it is trusted as the most effective tax at delivering (arguably) targeted fiscal relief or stimulus overnight.
Despite the rises in Income Taxes, the total revenue take for the OECD member states was down from 34.15% last year surveyed to 34.0% in 2022. The total tax tax was near its lowest since the 2007 Finance Crisis. Corporate income taxes rose sharply in the last year due to global economies bouncing back from the COVID lockdown.
The OECD survey covers its 38 members; the number of countries with VAT is 175.
Whilst there was a slight fall in dominance of VAT, revenues remained consistent and buoyant, meaning governments will continue to expand it as a positive taxing model.
Regionally, it is interesting to note the approximate dependency on VAT, which in order is:
- South America
- AsiaPac; and
- North America
The Organisation for Economic Co-operation and Development is an intergovernmental organisation with 38 member countries. The OECD takes an active role in researching and assisting member and non-remember states in developing their tax policies and administrations. This includes the Standard Audit File for Tax SAF-T, a standard for the exchange of transaction reporting for VAT.