Adobe Stock, Romolo Tavani
February 10, 2022

Sources of Government Revenue in the OECD

Developed countries raise tax revenue through a mix of individual income taxes, corporate income taxes, social insurance taxes, taxes on goods and services, and property taxes. The mix of tax policies can influence how distortionary or neutral a tax system is. Taxes on income can create more economic harm than taxes on consumption and property. However, the extent to which an individual country relies on any of these taxes can differ substantially.

While tax revenues have taken a hit due to the pandemic, many OECD countries are already seeing a recovery not only in growth measures but also in tax revenues. As the recovery continues, governments should pay close attention to how they raise revenue and avoid policy changes that could stifle an economic recovery or prove to be a complex burden on individuals and companies.

For instance, a country may decide to have a lower corporate income tax to attract investment, which may reduce its reliance on corporate income tax revenue and increase its reliance on other taxes, such as social insurance taxes or consumption taxes. On the other hand, a country may decide to raise revenue through broad-based and relatively flat taxes like social insurance taxes and consumption. Often those revenue sources are less volatile and less harmful to decisions to work and invest.

In general, OECD countries lean more on tax revenue from consumption taxes (32.1 percent), social insurance taxes (26.4 percent), and individual income taxes (24 percent) than on corporate income taxes (9.2 percent) and property taxes (5.6 percent).

Consumption taxes are most important tax revenue source for OECD countries OECD tax revenue 2022 sources of revenue in the OECD tax sources of revenue by country in the OECD 2022

The reliance on different types of taxes has shifted over time. Compared to 1990, OECD countries have on average become more reliant on social insurance taxes (an increase of 3.1 percentage points) and less reliant on individual income taxes (a decrease of 6 percentage points). These policy changes matter. Social insurance taxes generally have broader bases and lower rates and taxes on personal income often have higher tax rates and can be more distortive to worker decisions.

OECD countries have also become more reliant on revenue from corporate income taxes. This has occurred despite a general decline in corporate tax rates around the world. One cause for this change has been a shift in the mix of OECD member countries. Since 1994, 14 countries have joined the OECD. Of this group, Colombia, Mexico, and Chile all raise more than 20 percent of their revenue from corporate income taxes. The average share of corporate tax revenue among the other 35 OECD countries is 7.7 percent.

OECD tax revenue 2022 sources of revenue in the OECD tax sources of revenue by country in the OECD 2022 social insurance taxes consumption taxes OECD tax trends

The United States is the only country in the OECD with no Value-added Tax (VAT). Instead, most U.S. state governments and many local governments apply a retail sales tax on the final sale of products and excise taxes on the production of goods such as cigarettes and alcohol. The lack of a VAT makes the U.S. a bit of an outlier as it raises just 16.9 percent of total government revenue from consumption taxes while the OECD average is nearly twice that amount at 32.1 percent.

Designing tax policy in a way that sustainably finances government activities while minimizing distortions is important for supporting a productive economy. Policymakers should continue to explore ways to shift from more distortive taxes like those on income toward taxes that are less likely to cause economic disruptions like consumption or property taxes.

OECD tax revenue 2022 sources of revenue in the OECD tax sources of revenue by country in the OECD 2022 social insurance taxes consumption taxes OECD tax trends sources of tax revenue in OECD countries

Sources of Revenue in OECD Countries
Percent of Total Revenue Raised
Country Individual Taxes Corporate Taxes Social Insurance Taxes Property Taxes Consumption Taxes Other
Australia (a) 42 17.1 0 9.8 26.3 4.7
Austria 22 4.9 37 1.4 27.2 7.5
Belgium 27.7 7.7 31.8 8 24.8 0
Canada 36.3 12.3 14.2 12.1 21.6 3.4
Chile 10.3 24.3 8 5.2 54.9 0
Colombia 6.9 24.5 9.9 9.7 41.4 7.6
Costa Rica 6.8 8.4 36.1 2 33.3 13.4
Czechia 13.5 8.4 46.1 0.6 31.5 0
Denmark 54.2 5.6 0.1 4.2 30.7 5.1
Estonia 17.8 4.9 37.3 0.6 39.3 0
Finland 30 5 27.5 3.6 33.9 0.1
France 21 5.1 32.7 8.8 27 5.4
Germany 27 4.3 39.7 3.3 25.7 0
Greece (b) 15.8 5.4 33.2 7.9 38.5 1.1
Hungary 14.8 2.8 31 3 45.4 3
Iceland 42.3 6 8.9 6.8 31 5.1
Ireland 32.7 15.9 17 5.7 27.8 1
Israel 22.1 9.3 17 9.9 35.7 5.9
Italy 26.9 4.9 31.5 5.7 26.9 4.1
Japan (a) 18.8 12 41 8.2 19.7 0.3
Latvia 19.1 2.3 31.6 3 44 0
Lithuania 23 5.1 33.4 1 37.5 0
Luxembourg 25.5 12 29.3 10 23 0.1
Mexico (a) 21 20.1 13.9 1.6 37.2 6.1
Netherlands 22.8 7.8 34.3 4.2 30.3 0.6
New Zealand (b) 38.3 14.2 0 5.9 38.8 3.1
Norway 29.2 6.2 28.9 3.4 32.2 0.2
Poland 14.4 6.3 38.4 3.6 33.8 3.5
Portugal 19.9 7.9 29.5 4.2 37.5 1
Republic of Korea 18.8 12.1 28 14.2 24.4 2.4
Slovakia 10.9 7.2 44.6 1.4 35.1 0.7
Slovenia 14.7 3.6 45.7 1.7 34.2 0.1
Spain 23.8 5.4 37.5 6.7 26.7 0
Sweden 29.1 6.6 21.5 2.2 28.6 12
Switzerland 30.7 11.1 25.1 7.8 18.8 6.6
Turkey 13.2 8.7 29.7 4.4 43 1
United Kingdom 28.9 7.1 20.9 11.8 31 0.4
United States of America 41.1 5.1 24.8 11.9 16.9 0.1

Note:

(a) Data for Australia, Japan, and Mexico is from 2019 because 2020 data was not available yet.

(b) For Greece and New Zealand only the aggregate Taxes on Income, Profits, and Capital Gains were available for 2020. To split this aggregate into the three subcategories of Individual Income Taxes, Corporate Income Taxes, and Other Income Taxes, each subcategory’s average share of the three years prior (2017-2019) was used to weigh it.

Source: OECD, “Revenue Statistics – OECD Countries Comparative Tables.”

Banner image attribution: Adobe Stock, Romolo Tavani

Previous Versions of Sources of Government Revenue in the OECD

Sources of Government Revenue in the OECD, 2021

February 11, 2021

Sources of Government Revenue in the OECD, 2020

February 19, 2020

Sources of Government Revenue in the OECD, 2019

April 23, 2019

Sources of Government Revenue in the OECD, 2018

March 22, 2018

Sources of Government Revenue in the OECD, 2017

September 6, 2017

Sources of Government Revenue in the OECD, 2016

July 7, 2016

Sources of Government Revenue across the OECD, 2015

April 30, 2015

Sources of Government Revenue in the OECD, 2014

November 12, 2014