OECD notes falling tax burden

Date: 25th November 2009

The burden of tax paid by individuals and businesses fell across the world last year, the Organisation for Economic Co-operation and Development (OECD) has said.

According to the Paris-based group, the ratio of tax revenues to GDP in member states, including the UK, dropped from 35.8 to 35.2 per cent during 2008.

The OECD added that the overall tax burden is likely to have fallen further this year.

Credit crunch conditions and recessions have been seen as a likely cause of the downwards tax trend, with the group pointing out that "tax receipts often fall proportionately more than GDP" during downturns.

Governments have also implemented strategic tax cuts in order to stimulate their shrinking economies.

For example, the minimum stamp duty threshold has been raised from £125,000 to £175,000 and VAT has been cut from 17.5 to 15 per cent in the UK.

OECD secretary-general Angel Gurria said that tax revenue would be a key issue in controlling deficits built up during the downturn.

"Governments acted decisively in 2008 and 2009 to support demand during the crisis," he commented.

"But falling tax receipts underline the challenge they will face, once the recovery is secured, in maintaining sound public finances."

The UK has been in recession since late 2008.

Posted by Jacob Williams