23/07/2020 - Despite good progress in increasing tax-to-GDP ratios and mobilising domestic revenues across economies in the Asia-Pacific region in 2018, tax revenues are expected to take a hit as a result of the COVID-19 pandemic, according to new OECD research.
Revenue Statistics in Asian and Pacific Economies 2020 shows that in 2018, more than two thirds of the 21 Asian and Pacific economies covered by the report – including Bhutan, the People’s Republic of China, Mongolia and Nauru for the first time – experienced an increase in tax-to-GDP levels. Tax-to-GDP ratios in the region ranged from 11.9% in Indonesia to 35.4% in Nauru, which was the only country whose tax-to-GDP ratio exceeded the OECD average of 34.3%. Eight of the eleven Asian countries included in the publication registered a tax-to-GDP ratio below 20% while seven of the ten Pacific economies had a tax-to-GDP ratio above 23%.
Nauru, Tokelau and Mongolia achieved the largest increases in their tax-to-GDP ratios between 2017 and 2018, of 6.4 percentage points (p.p.), 3.8 p.p. and 2.5 p.p., respectively. In each case, the increase resulted from tax policy changes, including higher tax rates on personal income, alcohol and tobacco in Mongolia, higher tobacco duties in Tokelau and higher rates across a number of taxes in Nauru. Four other countries increased their tax-to-GDP ratio by more than one percentage point, while Bhutan was the only country whose tax-to-GDP ratio fell by more than 1 percentage point (1.4 p.p.).
There remain significant differences in tax structure across the Asia-Pacific region. In 10 of the 21 economies covered in the report, taxes on goods and services accounted for the largest share of tax revenues in 2018. In the remaining countries, income taxes provided the main share of tax revenues, with the exception of Japan, where social security contributions were the principal source of tax revenues.
The report includes a special feature, co-authored by the Asian Development Bank (ADB) and the OECD, on the role of tax policy and administration during the COVID-19 crisis. It finds that tax and non-tax revenues are likely to decrease significantly in Asia-Pacific as a result of the crisis and that countries will be affected in different ways depending on the structure of their economy: those reliant on natural resources, tourism and trade taxes are especially vulnerable.
In pointing to potential policy responses in the future, the report notes that environmentally related taxes continue to play a limited role across the region and could be an important source of revenues in promoting a green recovery from the COVID-19 pandemic. In 2018, they ranged from 0.05% of GDP in Papua New Guinea to 8.0% of GDP in the Solomon Islands, against an OECD average of 2.3% of GDP.
This seventh edition includes 21 economies, which account for over 75% of GDP in Asia and over 90% in the Pacific. The data contained in this report is also included in the Global Revenue Statistics Database, which includes comparable tax and revenue data for 105 economies.
Revenue Statistics in Asian and Pacific Economies 2020 is a joint annual publication of the OECD Centre for Tax Policy and Administration and the OECD Development Centre with the co-operation of the ADB, the Pacific Islands Tax Administrators Association and the Pacific Community, with the support of the governments of Ireland, Japan, Luxembourg, Norway, Sweden and the United Kingdom.
To access the report, data, key findings, and country notes, visit http://oe.cd/revenue-statistics-in-asia-and-pacific