Asian and Pacific economies: decreases in tax revenue highlight need to broaden tax bases
30 November, 2018, 5:38 pm
BRUSSELS, 30 NOVEMBER 23018 (EURO WIRES) – The fifth edition of Revenue Statistics in Asian and Pacific Economies – released Thursday– shows that tax-to-GDP ratios fell in most of the 16 Asian and Pacific economies covered by the report between 2015 and 2016 due to a combination of policy reforms and decreasing natural resource prices.
While tax revenues have increased in a majority of Asian and Pacific economies over the last decade, the report finds that only three out of the 16 economies increased their tax-to-GDP ratios between 2015 and 2016 compared to nine in the previous year.
For the first time, Revenue Statistics in Asian and Pacific Economies includes six Pacific Island economies – the Cook Islands, Fiji, Papua New Guinea, Samoa, the Solomon Islands and Tokelau – as well as Australia, New Zealand and Thailand, bringing the total number of countries included in the report to 16. The report is a joint publication by the OECD Centre for Tax Policy and Administration and the OECD Development Centre with the co-operation of the Asian Development Bank (ADB), the Pacific Island Tax Administrators Association (PITAA) and the South Pacific Community (SPC) and the support of the European Union. Revenue Statistics in Asian and Pacific Economies 2018 also includes a special feature that explores the management of taxpayer compliance which varies widely in Asian and Pacific economies.
Tax-to-GDP ratios in 2016 varied widely across Asian and Pacific economies. In the Pacific Islands included in the report, tax-to-GDP ratios ranged from 12.2 per cent in Papua New Guinea to 30.0 per cent in the Cook Islands. All but two Pacific economies had tax-to-GDP ratios above 24 per cent while Australia and New Zealand had ratios over 27 per cent. In comparison, the tax-to-GDP ratios in Asian countries ranged from 11.6 per cent in Indonesia to 30.6 per cent in Japan, with all Asian countries other than Japan and Korea having ratios of less than 19 per cent. All countries in the report had a lower tax-to-GDP ratio than the OECD average of 34.0 per cent in 2016. Scope exists in Asian and Pacific economies to broaden tax bases in order to mobilise higher levels of domestic revenues and to reduce vulnerability to external shocks.
The changes in tax-to-GDP ratios observed between 2015 and 2016 were most pronounced in the Pacific Islands. Fiji, Papua New Guinea and the Solomons Islands experienced the largest decreases (of over 0.9 percentage points) and the Cook Islands recorded the largest increase (of 1.5 percentage points). Most Pacific economies maintained high tax-to-GDP ratios relative to many of the Asian economies covered by the report.
Tax structures differ between the Asian and Pacific economies included in the publication. Across all countries, revenues from corporate income tax (CIT) were high by international standards, ranging between 9.4 per cent of total tax revenue in Samoa and 41.1 per cent of total tax revenue in Malaysia in 2016 (in each case higher than the OECD average of 9.0 per cent). However, with three exceptions, Asian countries generated a higher level of CIT revenues than personal income tax revenues in 2016, whereas the reverse was observed for Pacific economies with the exception of Fiji.
Taxes on goods and services are also an important source of revenues in the Asian and Pacific economies. Where levied, value-added taxes (VAT) played a significant role in the tax revenues of Pacific economies in 2016, accounting for more than 25 per cent of revenues except in Australia and Papua New Guinea. VAT was less significant in Asian countries, generating less than 25 per cent of total tax revenue in all Asian countries except Indonesia.