Breaking News: In 2024, labor taxes propelled tax revenues in OECD nations to unprecedented heights! A new report from the OECD reveals a significant surge in tax collection, painting a complex picture of economic shifts.
The Revenue Statistics 2025 report indicates that the average tax-to-GDP ratio across OECD countries reached an all-time high of 34.1% in 2024. This marks a 0.3 percentage point increase compared to the previous year, following two years of decline. This means that, on average, a larger portion of each country's economic output is now being channeled into tax revenue. The report provides a wide range, from 18.3% in Mexico to 45.2% in Denmark.
The report also reveals some interesting trends. The tax-to-GDP ratio increased in 22 of the 36 countries for which preliminary data is available. Latvia and Slovenia experienced the most significant increases, with 2.4 percentage points and 1.9 percentage points respectively, mainly due to higher social security contributions (SSCs). On the other hand, Colombia saw the largest decrease, at -2.2 percentage points.
But here's where it gets controversial: SSCs increased in 26 out of the 36 countries between 2023 and 2024. Simultaneously, personal income tax (PIT) revenues rose in 28 of the 36 countries. Governments are increasingly turning to labor taxes to fund their spending.
Looking at the bigger picture, PIT has been a primary driver of overall tax revenue growth across OECD countries over the longer term. Between 2011 and 2023, PIT revenue increased by an average of 0.9 percentage points across the OECD.
And this is the part most people miss: For the first time, the report includes a special feature analyzing PIT revenue by income source for 29 countries. It shows that employed-labor income was the main source of PIT revenue in all of these countries in 2023. However, in most countries, the share of employed-labor income in overall PIT revenue declined between 2011 and 2023, while income from capital and self-employment increased.
What do you think? Are you surprised by these figures? Do you believe the increased reliance on labor taxes is sustainable? Share your thoughts in the comments below!
