OECD countries’ tax revenues fell in 2020, but less than their GDPs

The ratio of tax revenues to GDP in OECD countries rose slightly in 2020 amid the Covid-19 pandemic, as nominal tax revenues generally fell but did so at a lower rate than countries’ GDPs, according to the OECD’s 2021 annual revenue statistics released December 6.

Corporate income tax revenues saw the largest decreases in 2020, although they took less of a hit than during the global financial crisis of 2007–2009, the report notes. Out of 38 OECD countries, 26 reported drops in corporate tax revenues in 2020, with an average decrease of 0.37 percentage points.

Norway saw the largest drop in corporate tax revenues – 3.5 percentage points – attributed to petroleum tax act changes and some other measures. There was also a marked drop in corporate tax revenue in the Czech Republic – 1.3 percentage points – attributed to various business tax incentives.

On the other hand, personal income tax revenues actually increased in most OECD countries (28 of 38) in 2020. The OECD attributes this to the broad support measures enacted by governments during the pandemic.

On the whole, corporate income taxes counted for a relatively small share of tax revenues (9.6%). Personal income taxes in combination with social security contributions contributed on average about half of OECD countries’ tax revenues.

Overall, the ratios of tax revenues to GDP varied widely among OECD countries last year, from 17.9% in Mexico to 46.5% in Denmark. The OECD average was 33.5% in 2020 – up 0.1 percentage points from 2019. In the US, the revenue-to-GDP ratio was on the lower end of the scale at 25.5.