Thursday, 31 January 2008

Tax burden

According to figures in the latest edition of the OECD’s annual Revenue Statistics publication the average tax burden in OECD countries is back up to the historic highs of 2000 after a brief reduction between 2001 and 2004. The tax burden is measured as the ratio of total tax revenue to gross domestic product (GDP). The average tax burden in the 30 OECD countries reached 36.2% of GDP in 2005, the latest year for which complete figures are available. The lowest burden appears to be Korea (South I would assume) with a ratio of 25.5%. The highest is Sweden at a whopping 50.7%!

In the case of New Zealand the ratio stands at 37.8 for 2005, so above the OECD average. For comparison, Australia's ratio is 30.9, Ireland's 30.6 and the US is 27.3. It is interesting to note that in 1975, the first year for which figures are given, New Zealand's ratio was 28.5 while Australia's was 25.8. So back in 1975 New Zealanders paid a bit less than 3% more of GDP in tax than Australians while by 2005 the gap had risen to about 7%. In 1975 the OECD average was 29.5%, so New Zealand was below the average back then. Over time the government in New Zealand is taking an ever increasing share of people's income.

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