Datastream
Tax-to-GDP Ratio: Comparing Tax Systems Around the World
The Briefing
- The tax-to-GDP ratio measures a country’s tax revenue, relative to the size of its economy (measured by its Gross Domestic Product, or GDP)
- A higher tax-to-GDP ratio means more money is going to government coffers, and in theory, public services like education and infrastructure
- Out of 35 OECD countries, Denmark has the highest tax-to-GDP ratio at 46.3%, while Mexico ranks last at 16.5%
Tax-to-GDP Ratio: Comparing Tax Systems Around the World
Taxes are an important source of revenue for most countries. In fact, taxes provide around 50% or more of government funds in almost every country in the world.
How does each country’s tax system compare to one another? This question is tricky to answer. Since countries’ populations and economies differ greatly, measuring total tax revenue is not the best way to compare international tax systems.
Instead, using a tax-to-GDP ratio is one of the more useful ways to compare tax systems around the world.
What is the Tax-to-GDP Ratio?
The tax-to-GDP ratio compares a country’s tax revenue to the size of its economy, which in this case is measured by its GDP.
The higher the ratio, the higher the proportion of money that goes to government coffers. If managed effectively, this can support the long-term health and prosperity of an economy. According to research conducted by the International Monetary Fund, countries should have a tax-to-GDP ratio of at least 12% in order to experience accelerated economic growth.
The countries that are part of the Organisation for Economic Co-operation and Development (OECD) all meet that threshold, with an average tax-to-GDP ratio of 33.8%.
Ranked: The Tax-to-GDP Ratios of OECD countries
The dataset used for this graphic looks at 35 of the 37 OECD countries, since recent data for Australia and Japan was not available.
| Rank | Country | Tax Revenue as % of GDP |
|---|---|---|
| 1 | 🇩🇰 Denmark | 46.3% |
| 2 | 🇫🇷 France | 45.4% |
| 3 | 🇧🇪 Belgium | 42.9% |
| 4 | 🇸🇪 Sweden | 42.9% |
| 5 | 🇦🇹 Austria | 42.4% |
| 6 | 🇮🇹 Italy | 42.4% |
| 7 | 🇫🇮 Finland | 42.2% |
| 8 | 🇳🇴 Norway | 39.9% |
| 9 | 🇳🇱 Netherlands | 39.3% |
| 10 | 🇱🇺 Luxembourg | 39.2% |
| 11 | 🇩🇪 Germany | 38.8% |
| 12 | 🇬🇷 Greece | 38.7% |
| 13 | 🇸🇮 Slovenia | 37.7% |
| 14 | 🇮🇸 Iceland | 36.1% |
| 15 | 🇭🇺 Hungary | 35.8% |
| 16 | 🇵🇱 Poland | 35.4% |
| 17 | 🇨🇿 Czech Republic | 34.9% |
| 18 | 🇵🇹 Portugal | 34.8% |
| 19 | 🇸🇰 Slovak Republic | 34.7% |
| 20 | 🇪🇸 Spain | 34.6% |
| 21 | 🇨🇦 Canada | 33.5% |
| 22 | 🇪🇪 Estonia | 33.1% |
| 23 | 🇬🇧 United Kingdom | 33.0% |
| 24 | 🇳🇿 New Zealand | 32.3% |
| 25 | 🇱🇻 Latvia | 31.2% |
| 26 | 🇮🇱 Israel | 30.5% |
| 27 | 🇱🇹 Lithuania | 30.3% |
| 28 | 🇨🇭 Switzerland | 28.5% |
| 29 | 🇰🇷 South Korea | 27.4% |
| 30 | 🇺🇸 United States | 24.5% |
| 31 | 🇹🇷 Turkey | 23.1% |
| 32 | 🇮🇪 Ireland | 22.7% |
| 33 | 🇨🇱 Chile | 20.7% |
| 34 | 🇨🇴 Colombia | 19.7% |
| 35 | 🇲🇽 Mexico | 16.5% |
| OECD Average | 33.8% |
At 46.3%, Denmark has the highest ratio on the list. The country puts its relatively high tax revenue to use, particularly when it comes to subsidizing post-secondary education—in Denmark, university is free for all EU citizens.
On the less-taxed end of the spectrum, the U.S. ranks 30 out of 35, with a ratio of 24.5%—that’s notably lower than the OECD average of 33.8%. It’s also worth mentioning that the U.S. has one of the highest GDP per capita measures out of all OECD countries.
Where does America’s tax revenue come from? It gains most of its revenue from the personal income tax. In fact, 41% of the country’s total tax revenue comes from taxes on personal income, as well as individual profits and gains—for context, the OECD average is 24%.
With President Biden’s recent announcement to increase corporate taxes and personal investment gains, America’s ratio could look a lot different in the near future.
>>Like this? You might find this article interesting, Unequal State Tax Burdens Across America
Where does this data come from?
Source: OECD
Details: This source uses 2019 provisional data to calculate each country’s tax-to-GDP ratio. For more information on methodology, read the full report by clicking here.
Support the Future of Data Storytelling
Sorry to interrupt your reading, but we have a favor to ask. At Visual Capitalist we believe in a world where data can be understood by everyone. That’s why we want to build the VC App - the first app of its kind combining verifiable and transparent data with beautiful, memorable visuals. All available for free.
As a small, independent media company we don’t have the expertise in-house or the funds to build an app like this. So we’re asking our community to help us raise funds on Kickstarter.
If you believe in data-driven storytelling, join the movement and back us on Kickstarter!
Thank you.
Datastream
Ranked: These Are 10 of the World’s Least Affordable Housing Markets
An analysis of 90+ major cities reveals which ones are the least affordable housing markets based on their price-to-income ratio.
The Briefing
- For the 12th year in a row, Hong Kong is the world’s least affordable housing market, according to Demographia’s ranking of 92 cities in select countries
- Sydney, Australia moves up one spot from last year’s ranking to take second place
These Are 10 of the World’s Least Affordable Housing Markets
It’s become increasingly difficult for middle-class families to purchase a home over the last few years—and the global pandemic has only made things worse.
According to Demographia’s 2022 Housing Affordability Report, the number of housing markets around the world deemed “severely unaffordable” increased by 60% compared to 2019 (prior to the pandemic).
This graphic looks at some of the least affordable housing markets across the globe, relative to median household income. The report covers 92 different cities in eight nations: Australia, Canada, China, Ireland, New Zealand, Singapore, the United Kingdom, and the United States.
The Least Affordable Housing Markets
Before diving in, it’s worth outlining the methodology used in this report, to help explain what’s classified as a severely unaffordable housing market.
To calculate affordability, a city’s median housing price and divided by its median household income. From there, a city is given a score:
- A score of 5.1 or above is considered severely unaffordable
- 4.1 to 5.0 is considered seriously unaffordable
- 3.1 to 4.0 is considered moderately unaffordable
All the cities on this graphic are classified as severely unaffordable—and, for the 12th year in a row, Hong Kong takes the top spot as the world’s most unaffordable housing market, with a score of 23.2.
| Housing Market | Nation | Score |
|---|---|---|
| Hong Kong | 🇭🇰 Hong Kong (SAR) | 23.2 |
| Sydney, NSW | 🇦🇺 Australia | 15.3 |
| Vancouver, BC | 🇨🇦 Canada | 13.3 |
| San Jose, CA | 🇺🇸 U.S. | 12.6 |
| Melbourne, VIC | 🇦🇺 Australia | 12.1 |
| Honolulu, HI | 🇺🇸 U.S. | 12.0 |
| San Francisco, CA | 🇺🇸 U.S. | 11.8 |
| Auckland, AUK | 🇳🇿 New Zealand | 11.2 |
| Los Angeles, CA | 🇺🇸 U.S. | 10.7 |
| Toronto, ON | 🇨🇦 Canada | 10.5 |
One reason for Hong Kong’s steep housing costs is its lack of supply, partly due to its lack of residential zoning—which only accounts for 7% of the region’s zoned land. For context, 75% of New York City’s land area is dedicated to residential housing.
Sydney moved up one spot this year, making it the second most expensive city to purchase a home on the list, with a score of 15.3. Besides Hong Kong, no other city has scored this high in the last 18 years this report has been released.
There are several theories for Sydney’s soaring housing rates, but industry expert Tom Forrest, CEO of Urban Taskforce Australia, boils it down to one fundamental issue in an interview with Australia Broker—supply isn’t keeping up with demand:
“Housing supply has been consistently not meeting demand in the Greater Sydney and across regional New South Wales…if you have supply consistently not meeting demand then the price will go up. That’s what happened and we’re seeing it in abundance.”Tom Forrest, CEO of Urban Taskforce Australia
The COVID-19 Impact
Middle-income earners were already feeling the squeeze prior to the global pandemic, but COVID-19 only exacerbated housing affordability issues.
As people began to work from home, high-income earners started to look for more spacious housing that wasn’t necessarily in the city center, driving up demand in suburban areas that were relatively affordable prior to the pandemic.
At the same time, supply chain issues and material costs impacted construction, which created a perfect storm that ultimately drove housing prices up.
But with interest rates rising and COVID-19 restrictions easing around the world, some experts are predicting a market cool down this year—at least in some parts of the world.
>>Like this? Then you might like this article: How Much Prime Real Estate Could You Buy for $1M?
Where does this data come from?
Source: Demographia
Details: The affordability score is calculated by taking a city’s median housing price and dividing it by the median household income. Anything over 5.1 is considered severely unaffordable
Notes: Data includes 92 metropolitan markets across eight countries; Australia, Canada, Ireland, Singapore, China, New Zealand, the U.K., and the U.S., as of the third quarter of 2021. Many European countries, along wth Japan, we excluded from the dataset, because information on median income was not readily available.
Datastream
Poll: Inflation is the Top Financial Concern for Americans
Many Americans are feeling the sting of inflation as everyday items like food and fuel have seen big price increases.
The Briefing
- Inflation has quickly become the top financial concern for American families
- Compared to 2021, far fewer Americans believe their financial situation is improving
Poll: Inflation is the Top Financial Concern for Americans
A recent survey by Gallup discovered that inflation has become the top financial concern for Americans, surpassing other issues like low wages and housing costs.
While this result may not be too surprising, it is interesting to see how today’s concerns compare to that of previous years. For reference, the Consumer Price Index (CPI) has grown 8.3% between April 2021 and April 2022, representing a near 40-year high.
Poll Results
Results were collected in April 2022 and are based on the responses of over 1,000 U.S. adults. In this case, the specific question was: What is the most important financial problem facing your family today?
| Trend | April 2022 | April 2021 | April 2020 | April 2019 |
|---|---|---|---|---|
| Inflation | 32% | 8% | 3% | 6% |
| Low wages | 11% | 10% | 11% | 11% |
| Gas prices | 10% | 1% | -- | -- |
| Housing costs | 8% | 9% | 9% | 8% |
| Health care costs | 7% | 8% | 8% | 17% |
Percentage of respondents. Includes the top five categories, based on April 2022 results.
Based on these results, we can see that inflation began to gain momentum in early 2021. Rising gas prices, which are a significant contributor to overall inflation, also popped up in 2021.
Implications
Significantly fewer Americans feel confident about their financial situation due to the rising cost of living. This was captured in the same Gallup survey referenced above.
| Income Group | 2022 | 2021 | Percentage point decrease |
|---|---|---|---|
| Upper | 50% | 28% | -22 |
| Middle | 48% | 39% | -9 |
| Lower | 63% | 45% | -18 |
Percentage of respondents who say their personal financial situation is improving.
The largest decreases were seen among the upper and lower income groups.
Upper income families tend to own more financial assets like stocks and bonds. An inflationary environment, especially when combined with rising interest rates, can eat away at the returns generated by these assets, which could explain this cohort’s drop in optimism.
Lower income families, on the other hand, are more likely to be struggling already. In fact, a 2017 report found that six in 10 Americans don’t have $500 in savings. With this in mind, it’s easy to see how an increase in the price of food or gas could cause worry.
Where does this data come from?
Source: Gallup
Notes: Interviews conducted April 1-19, 2022, with a random sample of 1,018 adults, aged 18 and older, living in all 50 U.S. states and the District of Columbia. For results based on the total sample of national adults, the margin of sampling error is ±4 percentage points at the 95% confidence level.
-
Money2 weeks agoMapping the Migration of the World’s Millionaires
-
Markets2 weeks agoVisualizing the Coming Shift in Global Economic Power (2006-2036p)
-
Datastream3 weeks agoRanked: These Are 10 of the World’s Least Affordable Housing Markets
-
Demographics2 weeks agoMapped: A Decade of Population Growth and Decline in U.S. Counties
-
Misc3 weeks agoVisualizing Well-Known Airlines by Fleet Composition
-
Markets4 weeks agoRanked: Visualizing the Largest Trading Partners of the U.S.
-
Misc1 week agoIconic Infographic Map Compares the World’s Mountains and Rivers
-
Energy2 weeks agoExplainer: What Drives Gasoline Prices?