I did a post last year documenting the choices OECD countries have made when it comes to tax rates - you might want to take a look at it before continuing. I'll wait here.
- Goods and services. This includes retail sales taxes and VAT/GST/HST revenues
- Corporate income taxes (CIT)
- Personal income taxes (PIT)
- Social security contributions (SSC), broken down into employer/employee components. 'Social security' is what the OECD calls the series; but it's better to interpret it as the tax wedge between what the employer pays and what the employee receives.
Here are the numbers:
|Goods and services||Corporate income||Personal income||Social security||Other||Total|
I've been trying to think of a good graphical representation for the data in this table (I even considered bubble graphs), but I can't. I decided on a sequence of bar graphs, where the ordering is done according to how important the various sources are.
The first graph sorts the countries by the size of all tax revenues as a share of GDP. These graphs are all pretty busy; clicking on them will produce a larger version:
Canada shows up as a relatively low-tax country, with the Nordic countries dominating the top of the list.
In this post - and expecially this graph, we saw that even though corporate rates vary greatly across time and across countries, there is remarkably little variation in CIT revenues as a share of GDP.
As noted in the other post, Norway is the big outlier here, even though its CIT rate is in the middle of the OECD pack - oil revenues are the explanation. CIT revenue shares are only weakly related to total spending; Norway aside, the CIT shares generated by the big-government countries are around the OECD average. Note also that Ireland - which has an ultra-low CIT rate of 12.5% - generates CIT revenues comparable to countries that apply much higher rates. Even in 2010, Irish CIT revenues were greater than in Germany as a share of GDP.
Here are the same data again, ranked by revenues from taxes on goods and services:
Canada is well down the list here. To provide some perspective, each GST point generates roughly half a per cent of GDP in revenues, so it would take the equivalent of a six percentage point increase in the GST to reach the OECD average.
Here are the data sorted according to personal income tax revenues:
Canada ranks above the OECD average in personal income tax revenues. Oddly enough, so does the US. Denmark looks to be a huge outlier here, and I'll get back to it later.
Sorting by the tax wedge:
Australia and New Zealand have no tax wedge revenues, and Canada's is below the OECD average. These taxes are easy to overlook, especially the employer payroll taxes that workers don't see. But since the incidence of payroll taxes falls mainly on workers (I had a really good link to a HDRC explainer by Bev Dahlby making the point, but it has gone dead. [Update: Kyle Hall has tracked it down in the comments - it's here.]), it is perhaps better to view Social Security taxes as a form of income tax. Of course, it should also be noted that these measures are invariably less progressive than income taxes. For example, contributions in Canada are capped, so the average rate paid by high earners declines with income.
When you do this, Denmark's relatively high PIT revenues don't lok so extreme, because its tax wedge is so small:
Canada's combination of relatively high PIT and a relatively small tax wedge puts it just under the OECD average when the two are combined. Social security taxes also explain how France can rank so highly in the total tax rankings with below-average personal income tax revenues.
The revenues generated by taxes on corporate income and on labour income put Canada around the OECD average; it is the relatively small amount of revenues from taxes on goods and services that put Canada below the average.