Government revenues/GDP lowest in 20 years OECD-wide

Fears of tax rises as government revenues near 20-year low, says OECD

From The Telegraph Dec 23, 2010.

Governments' tax revenues are close to a 20-year low, according to the Organisation for Economic Cooperation and Development (OECD), raising the prospect of widespread and painful tax rises.

The OECD estimates that between 2008 and 2009, tax revenues measured against economies' output fell, on average, more than one percentage point.

By Emma Rowley 6:30AM GMT 16 Dec 2010

The think-tank estimates that between 2008 and 2009, tax revenues measured against economies' output fell, on average, more than one percentage point across the 34 developed nations it covers.
The unprecedented drop dragged nations' average tax to gross domestic product (GDP) ratios - the "tax burden" - to less than 34pc, a level not seen for almost two decades.
"This is the lowest average tax burden since the early 1990s," said the OECD, blaming businesses' falling profits and tax cuts made to soften the effects of the recession.
The Paris-based body warned that many countries would now try to boost their tax revenues over and above the levels enjoyed before the financial crisis.
"These are figures that we have not seen in peacetime," said Jeffrey Owens, director of the OECD's tax policy centre, following the annual report's release.
He warned: "Any package to solve the current deficit situation in most countries will require an increase in taxation, and in many it will require tax increases that go beyond the level prior to the crisis."
In the UK, the tax-to-GDP ratio has now fallen for three consecutive years, to stand at just over 34pc in 2009, close to the region's average, according to the OECD.
Denmark last year had the highest tax burden, at more than 48pc, while Mexico had the lowest at below 18pc, preliminary figures show.
In Spain, which is struggling under huge debt, the tax burden slumped by seven percentage points of GDP from 2007 to 2009.
The OECD wants members to move away from taxes on income and profits, which could distort economies, towards taxes on consumption, such as VAT, and environmental taxes.
Despite reforms, "green" taxes to discourage pollution make up a smaller proportion of average GDP now than they did 10 years ago, according to the think-tank.
Separately, Chancellor George Osborne on Wednesday tried to play down expectations that UK taxes will be cut before the election planned for 2015. The VAT rise to 20pc coming in January was "not temporary", he said in an interview. "It can't be," Mr Osborne said. "We are talking about a totally different scale of revenue and the VAT rise is a structural change to the tax system to deal with a structural deficit."