The structure of government revenues shows the sources of revenues and helps identify the relative contribution of citizens and/or sectors of the economy towards paying for public expenditure.
According to the latest available data, in 2019, 59.5% of revenues in OECD countries were raised through taxes, followed by net social contributions (25.2%), sales (8.5%), and grants and other revenues (6.8%) (Figure 2.19). Between 2007 and 2019 the most important change in the composition of average revenues was the increase in the relative importance of net social contributions (+1 p.p.). This increase is the highest in Korea (5.8 p.p.) and Norway (3.5 p.p.). In Mexico, the relative importance of taxes rose by over 10 p.p. reflecting, among other things, policies increasing taxes on income, profits and personal gains, and tax administration measures to increase efficiency (Figure 2.20).
Between 2019 and 2020, on average, the share of total revenues collected through taxes in the OECD-EU countries fell by 0.7 p.p. from 57.7% to 57.0% (Figure 2.19). This is equivalent to one-third of the size of the change that occurred between 2007 and 2013 in OECD countries. The fall resulted from the slowing down of economic activity and its effects on revenue collection due to the COVID-19 pandemic. There is also wide variation in the relative importance of taxes as a source of revenues. In Denmark (88.7%) and Sweden (80.1%) taxes represented over 80% of total revenue in 2020. At the other end of the spectrum, taxes formed the smallest share in the Slovak Republic (45.4%) and Slovenia (46.5%).
The composition of revenues also varies by levels of government. In most cases central government relies heavily on taxes: 73% on average across OECD countries in 2019 (Online Figure G.4) while almost half of local government revenues was from grants and other revenues (Online Figure G.6). In the case of federal and quasi-federal countries there is more variation. States in Germany, Canada, the United States and Switzerland raise more than 50% of their income from taxes, while it is less than 10% in Mexico and Austria (Online Figure G.5).
The Revenue Statistics dataset treats social contributions as taxes. On average in 2018, over one-third of all taxes collected were on income and profits, followed by social security contributions (25.7%). Between 2007 and 2018, the importance of social contributions increased relative to taxes on income and profit. On average, income and profit taxes fell by 1.4 p.p. while social contributions rose by 1.3 p.p. It is worth noting that the share of corporate income tax recorded a peak in 2007 and, while it has increased in recent years, it is far from regaining that level. The largest change during this period was in Lithuania, where income and profit taxes fell by 11.6 p.p. while social contributions rose by 11.9 p.p. (Figure 2.21).
