The tax-to-GDP ratio compares a country’s tax revenue to its economy’s size, which is measured in this case by GDP.
The higher the ratio, the greater the amount of money that ends up in the hands of the government. If properly handled, this can contribute to an economy’s long-term health and success. In order to experience rapid economic growth, countries should have a tax-to-GDP ratio of at least 12 percent, according to research undertaken by the International Monetary Fund.
With an average tax-to-GDP ratio of 33.8 percent, the countries that make up the Organisation for Economic Co-operation and Development (OECD) all fulfill that criteria.
Which country’s tax-to-GDP ratio is the lowest?
The United States collects fewer tax revenues than other comparable economies. For example, corporation tax collections in the United States accounted for only 1% of GDP in 2019. Japan (4.2 percent), Canada (3.8 percent), the United Kingdom (2.5 percent), France (2.2 percent), Germany (2.0 percent), and Italy (1.9 percent) have the lowest corporate income tax collections among the Group of Seven (G7) countries. The G7 countries are an informal organization of rich democracies; at the annual G7 Summit, the heads of government of these states (together with officials from the European Union) convene.
What is Pakistan’s tax-to-GDP ratio?
Both the PTI-led administration and the PML-N will benefit from the re-basing of the economy because the GDP growth number during their terms would be higher. The GDP growth number during the PML-N-led administration increased from 5.78 percent to 6.1 percent GDP growth in 2017-18 due to re-basing of the economy.
On the basis of the base year 2005-6, GDP growth climbed from 3.94 percent to 5.3 percent in 2020-21 during the PTI-led government, but it increased to 5.57 percent with the change of base year in 2015-16.
Between 2005-6 and 2015-16, the national economy was re-based, increasing its size from Rs48 trillion to Rs55.5 trillion. In dollar terms, the economy increased from $298 billion to $347 billion in 2020-21. In dollar terms, per capita income increased from $1,666. However, the PTI-led government’s economy was still smaller than the PMLN-led government’s, at $357 billion in 2017-18.
With the re-basing done after ten years, the debt-to-GDP ratio has improved dramatically. Total debt and liabilities stood at 100.3 percent of GDP in 2005-6, but it has now decreased by 14% to 86.2 percent in 2020-21. The tax-to-GDP ratio has decreased from 9.6% to 8.6% of GDP.
Education spending as a proportion of GDP fell from 2% to 0.5 percent, and health spending fell from 1% to 0.5 percent. Agriculture, industrial, and service sector GDP shares in 2020-21 are revised to 24 percent, 19.5 percent, and 56.6 percent, respectively, compared to 23 percent, 20.9 percent, and 56 percent in 2015-16.
Because the overall size of the economy increased in both dollar and rupee terms, the current account deficit and the budget deficit will both improve. From the fiscal year 2005-6 to 2015-16, the re-basing of the economy replaced the base year after a ten-year period. The Pakistan Bureau of Statistics (PBS) conducted surveys of several sectors in order to capture economic activity, and the World Bank (WB) endorsed this effort.
“Yes, we did over 46 surveys to capture real economic activity, while the private sector education study was completed separately, and the results showed a near-50 percent improvement.” When The News contacted Chief Statistician Pakistan Bureau of Statistics (PBS) Dr Naeem Ul Zafar for response on Thursday, he stated, “We also conducted a separate survey related to private TV channels and cable/internet services.”
In this re-basing process, however, the PBS was unable to undertake a livestock census. In addition, the government chose to implement a petroleum development levy (PDL) as part of the new re-basing of indirect taxes.
When questioned why the GDP growth for the fiscal year 2020-21 went from 3.94 percent to 5.3 percent compared to 2005-6, official sources responded that Large Scale Manufacturing grew by over 15%, and wheat output climbed by 0.2 million tons from 27.3 million tons to 27.5 million tons.
In accordance with a tentative date to positive growth, the electricity sector’s growth became negative, therefore all of these sectors contributed to the GDP growth of 5.3 percent for 2020-21. When it is finalized in May 2021-22, there may be a little change in GDP growth. The PBS completed the re-basing exercise using 60 to 70 percent of the data available for 2021-22.
From prior provisional estimates of $298 billion, the economy now has a size of $347 billion for fiscal 2020-21. National accounts were re-based in 1980-81, then again in 2000 and 2005-6, and finally in 2015-16. The 2005-6 exercise was carried out in 2007-8. Now, the 2015-16 base year is being adopted in 2021-22.
Dr. Ashfaque Hassan Khan, a famous economist, said it was a normal exercise aimed at completely capturing new sectors of the economy when approached. He claimed that during a Macroeconomic Group meeting, he had asked Prime Minister Imran Khan to release the re-basing of national accounts because he knew the exercise had been completed and that it should be shared.
What is the tax-to-GDP ratio in the United States?
In terms of tax-to-GDP ratio, the United States placed 32nd out of 38 OECD nations in 2020. In 2020, the US had a tax-to-GDP ratio of 25.5 percent, compared to 33.5 percent for the rest of the OECD. In terms of tax-to-GDP ratio, the United States was placed 32nd out of 38 OECD nations in 2019.
In India, what is the GDP to tax ratio?
- In India, there is one direct taxpayer for every 16 voters. Only one percent of India’s population pays income tax.
- India’s gross tax to GDP ratio declined from 11 percent in FY19 to 9.9 percent in FY20, then improved to 10.2 percent in FY21 (owing to a drop in GDP) and is expected to be 10.8 percent in FY22, well below the emerging market economy average of 21 percent and the OECD average of 34 percent.
Why is India’s tax-to-GDP ratio so low?
The tax GDP ratio depicts a country’s tax revenue in terms of GDP. For example, if India’s tax GDP ratio is 16 percent, it signifies that the government receives 16 percent of GDP in tax revenue from individuals and businesses. The tax GDP ratio indicates the wealth of the government’s coffers. Tax GDP ratio determines the government’s ability to spend on social-economic development programs, military, salaries, and pensions, among other things.
The government should be able to fund its expenditures with sufficient revenues. As a result, the tax-to-GDP ratio should be sufficient to cover government spending.
The tax-to-GDP ratio is higher in Western countries. At the same time, government spending is very high, as the government spends on healthcare expenses, free schools, and other things.
In comparison to a number of other countries, India’s tax-to-GDP ratio is lower. According to the 2016-17 budget, the combined tax-to-GDP ratio for the center and states is expected to be approximately 16.5 percent.
According to the 2016-17 budget, the tax GDP ratio for the center was 11.3 percent, and the 2017-18 budget makes the same projection.
Because of the limited tax base, the tax-to-GDP ratio is smaller. Only 3% of the population of the country pays income tax. There is widespread tax evasion. Similarly, corporations have a proclivity to avoid paying taxes.
The government has taken many initiatives in the last decade to increase the tax-to-GDP ratio. The primary stumbling block is the existence of a black economy. The demonetization program, as well as the subsequent initiatives, have bolstered the fight against black money. Steps to boost GDP through taxes are essentially divided into two categories:
1. Improving the tax structure
2. Increasing tax administration efficiency
A streamlined tax system with the optimum number of tax rates, optimum tax rates, low concessions and deductions, and so on, reduces the opportunities for tax avoidance and evasion. The following are examples of government efforts in this direction:
By eliminating all concessions and deductions, the corporate income tax rate is aimed to be reduced to 25%.
There are only three rates in the case of PIT. Deductions and exclusions that were no longer needed were abolished.
In terms of indirect taxes, the introduction of GST is expected to boost revenue because the rate structure has been optimized, with four rates for goods and services.
The primary pillar for increasing tax revenues is now tax administration. In recent years, a number of administrative methods have been implemented to increase tax revenue collection. The following are important administrative measures:
Project insight, e-way bills, Project Insight, Project Saksham, and other digital technologies are being used to improve tax administration.
Project Insight is a project run by the IRS to keep track on high-value transactions. ‘Project SAKSHAM’ is the Central Board of Excise and Customs’ New Indirect Tax Network (Systems Integration) (CBEC). The Project will assist with:
The Indian Customs Single Window Interface for Facilitating Trade (SWIFT) has been extended, and
other taxpayer-friendly efforts under the Central Board of Excise and Customs’ Digital India and Ease of Doing Business initiatives.
increasing tax enforcement, including more demands for transparency and accountability;
According to the TARC, technological advancements have greatly aided tax administration. PAN-based transactions, online tax filings, and other innovations have enhanced the country’s tax administration efficiency.
What is the highest tax rate in the world?
Taxation varies greatly between countries. Have you ever wondered which country has the most expensive taxes? Let’s take a look at India first before moving on to our list of income tax rates in other nations. Under the new tax structure, annual incomes under Rs 2,50,000 are not taxed, but any amount above this is.
In India, to be precise. The income tax rate begins at 5% for the lowest slab and gradually increases with increasing slabs, reaching a maximum of 30% for the highest slab. But what is India’s highest income tax bracket? The highest slab is over Rs 15,00,000, and the income tax payable under the new regime is 30% of all income above Rs 15,00,000.
Let us now look at the top ten countries with the highest tax rates. Take a look to find out more.
Countries with the highest income tax rates
- Finland is a beautiful spot for those who enjoy the chilly weather, with long days and longer nights. But, before you make arrangements to relocate, keep in mind that the income tax rates in this country are high, with the highest tax level being 56.95 percent.
- Denmark: As appealing as living in Denmark may appear, it is not without its drawbacks. Here, the tax rate rises to a stunning 56 percent.
- Austria: Austria levies a variety of tax rates, which rise steadily from lower to higher income brackets. The top tax brackets are subject to a 55 percent income tax rate.
- Sweden’s high life expectancy rate and high standard of living indicate that it is an expensive country. The current income tax rate in this country is 52.9 percent.
- Aruba: The island nation of Aruba may appear to be a fantastic vacation spot. Even yet, with a 52 percent income tax rate, you might want to think twice about relocating there.
- Portugal: You may have heard about Portugal’s historical significance and its popularity as a tourist destination. Due to its highest income tax rate of 48 percent, the country is a well-developed high-income nation.
- South Korea: Are you drawn to South Korea because of your love of K-pop and K-dramas? Well, be cautious, because the personal income tax rate there is set to rise to 45 percent.
- Germany’s tax rates begin at 14 percent and climb in a linear fashion. The highest income bracket has a 45 percent tax rate.
- Japan is well-known around the world for its technological achievements. The country’s income tax rate, which can be as high as 45 percent, is a less well-known fact.
- Switzerland is undeniably a posh country, known for its fine cheeses and chocolates. Of course, the high standards come with a 40 percent income tax rate.
Last words
One of the most important sources of revenue for every government is income tax. As we can see from this list, taxes fluctuate greatly between countries. European countries, on average, appear to have higher tax rates than the rest of the globe. India, fortunately, does not rank among the top ten countries with the highest tax rates.
What is the economic foundation of India?
India’s economy is a developing market economy with a middle income. It has the sixth-largest nominal GDP and the third-largest purchasing power parity economy in the world (PPP). According to the International Monetary Fund (IMF), India ranks 145th by nominal GDP and 122nd by nominal GDP per capita (PPP). From 1947 through 1991, consecutive administrations advocated protectionist economic policies that included substantial government intervention and regulation. In the form of the License Raj, this is referred to as dirigism. Following the conclusion of the Cold War and a severe balance-of-payments crisis in 1991, India adopted substantial economic liberalization. Annual average GDP growth has been 6% to 7% since the beginning of the twenty-first century, and India has surpassed China as the world’s fastest growing major economy from 2013 to 2018 and in 2021. From the first through the nineteenth centuries, India had the world’s largest economy for the majority of the two millennia.
The Indian economy’s long-term development prospects remain optimistic, thanks to its young population and low dependency ratio, healthy savings and investment rates, and increasing globalisation and integration into the global economy. Due to the shocks of “demonetisation” in 2016 and the implementation of the Goods and Services Tax in 2017, the economy slowed in 2017. Domestic private consumption accounts for over 70% of India’s GDP. The country’s consumer market is still the world’s sixth largest. Apart from individual consumption, government spending, investment, and exports all contribute to India’s GDP. Pandemic had an impact on trade in 2020, with India becoming the world’s 14th largest importer and 21st largest exporter. Since January 1, 1995, India has been a member of the World Trade Organization. On the Ease of Doing Business Index, it is ranked 63rd, while on the Global Competitiveness Report, it is ranked 68th. With 500 million workers, India had the world’s second-largest labor force. India boasts one of the biggest concentrations of billionaires in the world, as well as substantial income disparity. Fewer than 2% of Indians pay income taxes due to a variety of exclusions.
During the global financial crisis of 2008, the economy experienced a little slowdown. To increase economy and generate demand, India implemented fiscal and monetary stimulus measures. Economic growth picked up in the years after that. According to the World Bank, India must focus on public sector reform, infrastructure, agricultural and rural development, removal of land and labor regulations, financial inclusion, boosting private investment and exports, education, and public health in order to achieve sustainable economic development.
The United States, China, the United Arab Emirates (UAE), Saudi Arabia, Switzerland, Germany, Hong Kong, Indonesia, South Korea, and Malaysia were India’s ten major trading partners in 2020. India received $74.4 billion in foreign direct investment (FDI) in 201920. The service sector, the computer industry, and the telecom industry were the major sectors for FDI inflows. India has free trade agreements in place or in the works with a number of countries, including ASEAN, SAFTA, Mercosur, South Korea, Japan, and a number of others.
The service sector accounts for half of GDP and is still developing at a rapid pace, while the industrial and agricultural sectors employ the majority of the workforce. By market capitalization, the Bombay Stock Exchange and the National Stock Exchange are among the world’s largest stock exchanges. India is the world’s sixth-largest manufacturer, employing over 57 million people and accounting for 3% of global manufacturing output. Rural India accounts for almost 66 percent of the population and accounts for roughly half of the country’s GDP. It has the fourth-largest foreign-exchange reserves in the world, valued at $631.920 billion. India’s national debt is large, at 86 percent of GDP, and its fiscal deficit is 9.5 percent of GDP. The government-owned banks in India were beset with bad debt, resulting in slow lending growth. At the same time, the NBFC sector has been hit by a liquidity problem. India is dealing with moderate unemployment, rising income disparity, and declining aggregate demand. In FY 2019, India’s gross domestic savings rate was 30.1 percent of GDP. Independent economists and financial institutions have accused the government of falsifying different economic figures, particularly GDP growth, in recent years. India’s GDP in the first quarter of FY22 (Rs 32.38 lakh crore) is roughly 9% lower than in the first quarter of FY20 (Rs 35.67 lakh crore) in 2021.
India is the world’s largest maker of generic pharmaceuticals, and its pharmaceutical industry supplies more than half of the world’s vaccination need. With $191 billion in sales and over four million employees, India’s IT industry is a major exporter of IT services. The chemical sector in India is immensely diverse, with a market value of $178 billion. The tourist sector employs approximately 42 million people and provides roughly 9.2% of India’s GDP. India is the world’s second-largest producer of food and agriculture, with $35.09 billion in agricultural exports. In terms of direct, indirect, and induced effects in all sectors of the economy, the construction and real estate sector ranks third among the 14 key industries. The Indian textiles sector is worth $100 billion, contributing 13% of industrial output and 2.3 percent of GDP while directly employing nearly 45 million people. By the number of mobile phone, smartphone, and internet users, India’s telecommunications industry is the world’s second largest. It is both the world’s 23rd and third-largest oil producer and consumer. India has the world’s fifth-largest vehicle sector in terms of production. India’s retail market is valued $1.17 trillion, accounting for almost 10% of the country’s GDP. It also boasts one of the fastest-growing e-commerce markets in the world. India possesses the world’s fourth-largest natural resources, with the mining industry accounting for 11% of industrial GDP and 2.5 percent of total GDP. It’s also the second-largest coal producer, second-largest cement producer, second-largest steel producer, and third-largest electricity generator on the planet.
What is the formula for GDP?
Gross domestic product (GDP) equals private consumption + gross private investment + government investment + government spending + (exports Minus imports).
GDP is usually computed using international standards by the country’s official statistical agency. GDP is calculated in the United States by the Bureau of Economic Analysis, which is part of the Commerce Department. The System of National Accounts, compiled in 1993 by the International Monetary Fund (IMF), the European Commission, and the Organization for Economic Cooperation and Development (OECD), is the international standard for estimating GDP.
What is the GDP tax in Bangladesh?
Bangladesh’s government revenue will account for around 9.4% of the country’s gross domestic product in 2020. (GDP). This was a reduction from the previous year, when government revenue in Bangladesh accounted for almost 9.9% of the country’s GDP.
What are tax ratios, exactly?
The Tax Ratio is the most powerful indicator of a person’s tax efficiency. The tax ratio is the amount of money you pay in taxes as a percentage of your total income. To put it another way,
For instance, if you’re looking for a unique way to express yourself, try Your Tax Ratio is 50000/500000 = 10% if your gross salary is Rs. 5 lakhs and Rs. 50,000 is deducted as TDS. Go ahead and do it! Calculate your tax ratio to see how much money you can save in the thousands or lakhs.