Mexico and Chile have OECD’s lowest tax burden

The Organization for Economic Cooperation (OECD) and Development has published its annual report on the tax burdens in place in 2010 among its members, which shows that Mexico had the lowest tax-to-GDP ratio at 18.7%.

OECD data in the annual Revenue Statistics publication shows that the majority of OECD governments have stabilized the tax burden in place with the tax-to-GDP ratio increasingly nominally from 33.8% in 2009 to 33.9% in 2010. This however is still down from 34.6% in 2008 and below the most recent high point of 2007 when the tax-to-GDP ratio averaged 35.2%

Commenting on its report, the Organization said the underlying message from these comparisons is complex, as changes in tax revenues reflect not only changes in economic activity but also policy measures.

“In those European countries most affected by the financial crisis and subsequent recession there was an initial sharp fall in tax revenues, but then a small recovery in the tax to GDP ratio in 2010,” the OECD stated.

“The data collected also shows that in a period when all levels of government have seen pressure on expenditure and revenues, the average tax ratio for state, regional and local governments has remained steady since 2007 while that for central government has declined,” the OECD explained.

The report’s salient findings include that:

  • Out of 30 OECD countries for which provisional 2010 figures are available, tax-to-GDP ratios rose in 17 and fell in 13.
  • Compared with 2007 pre-crisis tax-to-GDP ratios, the ratio in 2010 was still down more than 3% points in six countries. In Spain it declined from 37.2% to 31.7% and in Iceland from 40.6% to 36.3%. Chile, Israel, New Zealand and the United States showed declines of 3-4% over the same period.
  • The tax burden increased from 31.4% to 34% between 2007 and 2010 in Estonia. Two other countries; Luxembourg and Turkey showed increases of 1-2 percentage points over the same period.
  • Denmark has the highest tax-to-GDP ratio among OECD countries (48.2% in 2010), followed by Sweden (45.8%).
  • Mexico (18.7% in 2010) and Chile (20.9%) have the lowest tax-to-GDP ratios among OECD countries. The United States has the third lowest ratio in the OECD region at 24.8% with Korea at 25.1% and Turkey at 26.0%.
  • The proportion of tax revenues accounted for by social security contributions rose from 25% to 27% between 2007 and 2009 whereas the share of taxes on corporate income and capital gains fell from 11% to 8% over the same period. The share of the other major tax categories were largely unchanged.