How do other countries raise more in tax than the UK?

Published by the Institute for Fiscal Studies, UK

Author: Maddalena Conte, Helen Miller and Thomas Pope

Key findings

The UK’s current tax take is high by historical UK standards, but below average among OECD countries. The UK government raises around 35% of national income in tax revenue, a share that has been edging up in recent decades and is now at its highest point since the late 1960s. The average among OECD countries is higher and many countries in Europe raise substantially more as a share of national income.

All OECD economies raise the majority of their tax revenues from three broad-based taxes on income, earnings and consumption. Income tax, social security contributions (SSCs) a21nd value added tax (VAT) / general sales tax (GST) account for over 50% of revenues in all advanced economies, and significantly more than that in most.

The UK raises a below-average share of national income from income tax and SSCs. It raises much less than many European countries from SSCs (National Insurance contributions) and from employer contributions in particular. The UK’s lower revenues from these taxes more than explain the UK’s below-average tax take – the UK raises more than average from taxes excluding income tax and SSCs.

Individuals at both the median and top of the UK income distribution pay less income tax and SSCs than they would if the UK adopted the tax system of a higher-tax country. In most cases, average tax rates would be higher for both median and high-income earners if the UK implemented the income tax and SSC system from one of the EU15 countries that raise more tax than the UK. The UK is more of an outlier at the median, especially for SSCs, than it is for top earners.

The UK has one of the more progressive income tax and SSC systems in the EU15 in the sense that average rates are high at the top relative to the median. Average tax rates rise more quickly with income in the UK, and are higher at the top relative to the median, than in most of the European countries that raise more revenue overall.

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