Asian economies need to increase tax revenues, OECD says
The governments of emerging Asian economies need to look at new revenue streams to make their economies more competitive and boost living standards, the OECD said in a new report, reports Tax News.
The report, Revenue Statistics in Asian Countries: Trends in Indonesia, Malaysia, and the Philippines, notes these countries’ tax-to-gross domestic product (GDP) ratios have grown steadily since 2000. However, their tax bases have expanded at a lesser rate in recent years and continue to trail behind OECD averages.
In 2013, Indonesia had a tax-to-GDP ratio of 13.1 per cent, slightly lower than the Phillipines’ 16.2 per cent and Malaysia’s 16.9 per cent. The three countries’ tax burdens were significantly below those of OECD countries in the region, such as South Korea (24.3 per cent) and Japan (29.5 per cent), and well below the OECD average of 34.1 per cent.
During the period 2000-2013, Indonesia’s tax-to-GDP ratio increased by 4.5 percentage points; Malaysia’s rose by 2.3 percentage points; and the Philippines’ grew by only 0.5 per cent. In contrast, the OECD average tax burden declined by 0.2 percent over the period.
Revenue from taxes on income, profit, and gains accounted for about 40 per cent of total tax revenues in Indonesia and the Philippines and over two-thirds in Malaysia. This was significantly higher than in Japan and South Korea (30 per cent) and the average among OECD countries (34 percent).
Corporate income tax accounted for 77 per cent of income tax payments in Malaysia and around 60 per cent in Indonesia and the Philippines. In Japan and South Korea they accounted for less than half the total (39 per cent in South Korea and 48 per cent in Japan).
Social security contributions make up a relatively small part of the tax base in the three countries. Only the Philippines sees a double-digit revenue contribution from these levies, of 13 per cent, while these levies account for less than two percent of revenues in Malaysia and Indonesia.
