In this article, we will look at 25 countries with highest tax-to-GDP ratio in the world. If you want to skip our detailed analysis, head straight to 5 Countries with Highest Tax-to-GDP Ratio in the World.
Tax-to-GDP Ratio: An Analysis
Governments generate revenue mainly from taxes all over the world. There are various types of taxes, but the most prominent taxes include income, sales, and estate taxes, among others. In the case of income taxes, the state imposes taxes on the income of individuals and businesses. The income taxes imposed on businesses are known as corporate income taxes. In most countries, the majority of the government revenue is added by individual income taxes followed by corporate income taxes. Welfare states usually have high income tax rates as they use the taxpayer’s money for social development in the country. Most of the countries with the highest tax-to-GDP ratio are the countries with the highest income tax rates in the world. Whereas, the countries with the lowest income tax rates in the world don’t have a high tax-to-GDP ratio, excluding Kosovo which has a high tax-to-GDP ratio.
The majority of European countries have high-income tax rates and also the highest tax-to-GDP ratio in the world. In recent years, European countries have made several tax reforms to maintain tax revenue levels while saving households and businesses from high inflation including reducing value-added taxes (VAT) and excise duties, cutting tax rates for low-income households, indexing the income tax to inflation, increasing tax rates for high-income households by raising recurrent taxes on immovable property and net wealth taxes.
According to the OECD Tax Policy Reform 2023 report, many countries reported an increase in tax revenues after the pandemic. In 2021, OECD countries’ average tax-to-GDP ratio rose for a second consecutive year, increasing by 0.6 percentage points from 2020 to 32.1%. This was the largest increase in tax-to-GDP across OECD countries between 1990 and 2021. Out of 36 countries, 24 noted an increase in tax-to-GDP ratio between 2020 and 2021. While, 11 countries suffered a decline in their tax-to-GDP ratio in that period. Norway reported the maximum increase in the tax-to-GDP ratio, followed by Lithuania, Spain, and Germany. Corporate taxes and VATs were the main drivers that led to the increment in revenue. On the contrary, Hungary suffered the largest decline in its tax-to-GDP ratio with a drop of 2.2 percentage points, followed by Canada, Iceland, Mexico, and Türkiye, which also recorded a drop of 1.1 percentage points in their tax-to-GDP ratios between 2020 and 2021.
In recent years, countries have made notable changes to international tax rules which have direct implications for multinational companies. In 2021, more than 130 OECD member jurisdictions agreed to new tax rules. With new international tax rules, large corporations are to pay more taxes in countries where they have their consumer base and pay less taxes in countries where they have headquarters, employees, and operations. The global tax agreement sets a minimum tax rate of 15%, increasing taxes on companies with earnings in low-tax jurisdictions.
Big Players in Europe
Novo Nordisk A/S (NYSE:NVO), Alvotech (NASDAQ:ALVO), and Equinor ASA (NYSE:EQNR) are some of the leading companies based out of the European countries with the highest tax-to-GDP ratio in the world.
Novo Nordisk A/S (NYSE:NVO) is one of the leading Danish multinational pharmaceutical companies. On January 31, Novo Nordisk A/S (NYSE:NVO) announced the earnings for the fourth quarter of 2023. The company reported earnings per share of $0.71, beating the consensus estimates by $0.05. The revenue was recorded at $9.55 billion, surpassing estimates by $636.57 million. Here are some of the comments from the Q4 2023 earnings call:
“In 2023, our total sales increased by 36%. The sales growth was driven by both operating units with North America operations growing 54% and international operations growing 15%. Our GLP-1 sales in diabetes increased 52%, driven by North America growing 52% and international operations growing 53%. Insulin sales decreased by 6%, driven by declining sales in the U.S. and Region China. Obesity care sales grew 154%. In International operations, sales grew 47%, driven by both Saxenda and Wegovy. Sales of Saxenda increased by 14% and sales of Wegovy reached around DKK 2 billion. Going forward, we continue to roll out Wegovy in a sustainable manner by volume cap launches to balance supply and demand.”
Equinor ASA (NYSE:EQNR) is a top energy firm based out of Norway. On February 19, Equinor ASA (NYSE:EQNR) signed a 15-year agreement for supplies of liquefied natural gas with Indian firm Deepak Fertilizers and Petrochemicals Corporation Limited (NSE:DEEPAKFERT). As per the agreement, around 0.65 million tons of LNG will be supplied annually starting from 2026.
Alvotech (NASDAQ:ALVO) is one of the leading firms that specialize in biosimilars. On February 24, Alvotech (NASDAQ:ALVO) announced that it has received FDA approval for its SIMLANDI injection, an interchangeable biosimilar to Humira. SIMLANDI helps in the treatment of adult rheumatoid arthritis, adult psoriatic arthritis, and adult ulcerative colitis, among other diseases. Alvotech (NASDAQ:ALVO) has obtained approval along with Teva Pharmaceuticals. Teva Pharmaceuticals will be Alvotech’s (NASDAQ:ALVO) strategic partner for the exclusive commercialization of SIMLANDI in the US.
These were a few leading firms based out of Europe. Now, let’s take a look at the countries with the highest tax-to-GDP ratio in the world.
25 Countries with Highest Tax to GDP Ratio in the World
Our Methodology
We selected the countries with the highest total tax revenue as a percentage of the GDP, as of 2023. The countries are ranked in ascending order of this metric. We took the data from CEIC Data. We have used GDP (PPP) as a tie-breaker and the data for GDP (PPP) was taken from the International Monetary Fund (IMF) database.
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25 Countries with Highest Tax to GDP Ratio in the World
25. Georgia
Tax-to-GDP Ratio: 23%
Georgia has a tax-to-GDP ratio of 23% and has a GDP of $88.09 billion. Georgia ranks 25th among the countries with the highest tax-to-GDP ratio in the world.
24. Hungary
Tax-to-GDP Ratio: 24%
Hungary has a GDP of $444.60 billion and a tax-to-GDP ratio of 24%. Hungary is one of the countries with the highest tax-to-GDP ratio in the world.
23. Tunisia
Tax-to-GDP Ratio: 24.60%
Tunisia has a GDP of $168.93 billion and a tax-to-GDP ratio of 24.60%.
22. Spain
Tax-to-GDP Ratio: 24.60%
Spain is one of the largest economies in Europe. The country has almost a 24.60% tax-to-GDP ratio. With a GDP of $2.51 trillion, Spain is one of the top countries with the highest tax-to-GDP ratio in the world.
21. Kosovo
Tax-to-GDP Ratio: 25.10%
Officially the Republic of Kosovo has a GDP of $29.60 billion. The country has a 25.10% tax-to-GDP ratio. Kosovo is ranked 21st among the countries with the highest tax-to-GDP ratio in the world.
20. Armenia
Tax-to-GDP Ratio: 25.10%
Armenia has a tax-to-GDP ratio of 25.10% and a GDP of $62.81 billion.
19. Ukraine
Tax-to-GDP Ratio: 25.60%
Ukraine has a tax-to-GDP ratio of 25.60% and a GDP of $501.07 billion. Ukraine ranks among the countries with the highest tax-to-GDP ratio in the world.
18. Netherlands
Tax-to-GDP Ratio: 25.60%
The Netherlands is one of the largest economies in Europe. The Netherlands has a GDP of $1.34 trillion and a tax-to-GDP ratio of 25.60%.
17. Croatia
Tax-to-GDP Ratio: 26.20%
Croatia has a tax-to-GDP ratio of 26.20% and a GDP of $172.78 billion.
16. Finland
Tax-to-GDP Ratio: 26.30%
Finland has a GDP of $346.97 billion and a tax-to-GDP ratio of 26.30%. Finland is one of the countries with the highest tax-to-GDP ratio in the world.
15. Greece
Tax-to-GDP Ratio: 26.70%
Greece is ranked 15th among the countries with the highest tax-to-GDP ratio in the world. Greece has a GDP of $434.83 billion and a tax-to-GDP ratio of 26.70%.
14. Bulgaria
Tax-to-GDP Ratio: 26.80%
Bulgaria has a GDP of $228.40 billion and a tax-to-GDP ratio of 26.80%.
13. Luxembourg
Tax-to-GDP Ratio: 27.20%
Luxembourg is one of the richest countries in the world. Luxembourg has a tax-to-GDP ratio of 27.20%.
12. United Kingdom
Tax-to-GDP Ratio: 27.40%
The United Kingdom is one of the largest economies in the world having a GDP of $3.98 trillion. The United Kingdom has a tax-to-GDP ratio of 27.40%.
11. Austria
Tax-to-GDP Ratio: 27.70%
Austria has a GDP of $645.56 billion and a tax-to-GDP ratio of 27.70%.
10. Italy
Tax-to-GDP Ratio: 28.80%
Italy has a tax-to-GDP ratio of 28.80% and a GDP of $3.29 trillion. Italy ranks 10th countries with the highest tax-to-GDP ratio in the world.
9. Belgium
Tax-to-GDP Ratio: 29.70%
Belgium has a GDP of $793.83 billion and a tax-to-GDP ratio of 29.70%.
8. Mongolia
Tax-to-GDP Ratio: 31.40%
Mongolia has a tax-to-GDP ratio of 31.40%. With a GDP of $56.63 billion, Mongolia ranks among the countries with the highest tax-to-GDP ratio in the world.
7. New Zealand
Tax-to-GDP Ratio: 31.50%
New Zealand has a GDP of $288.48 billion and a tax-to-GDP ratio of 31.50%.
6. Norway
Tax-to-GDP Ratio: 31.90%
Norway ranks sixth among the countries with the highest tax-to-GDP ratio in the world. Norway has a tax-to-GDP ratio of 31.90%.
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Disclosure: None. 25 Countries with Highest Tax-to-GDP Ratio in the World is originally published on Insider Monkey.