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==The development of modern tax systems==
==The tax burden==
Modern tax systems had their origins in the 18th century in the United States<ref>[http://www.treasury.gov/education/fact-sheets/taxes/ustax.shtml ''History of the US Tax System'', US Department of the Treasury Fact Sheet, 2009]</ref> and in Britain<ref>[http://www.hmrc.gov.uk/history/ ''A Brief History of Income Tax'' H M Revenue and Customs, 2009]</ref>, and have since evolved piecemeal until they have become so complex that they are fully understood only by highly-trained specialists.
(According to the OECD definition of tax revenues  % of GDP)
Tax revenues in the developed countries now  amount, typically, to 30 to 40 per cent of GDP, compared with 10 to 15 per cent at the beginning of the 20th century. The following paragraphs indicate some of the variations that have typically  been adopted. A comprehensive classification of taxes is available from the OECD<ref>[http://www.oecdwash.org/PUBS/ELECTRONIC/SAMPLES/revenue_methodology2004.pdf ''The OECD Classification of Taxes and Interpretative Guide'', OECD, 2009]</ref>
:::{|class = "wikitable"
!
!align="center"|&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Japan&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
!align="center"|&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Italy&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
!align="center"|&nbsp;&nbsp;&nbsp; France&nbsp;&nbsp;&nbsp;
!align="center"|&nbsp;&nbsp; Germany &nbsp;&nbsp;
!align="center"| United States
!align="center"| United Kingdom
!align="center"|&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OECD&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
|-
|1985
|align="center"|27.5
|align="center"|33.6
|align="center"|42.8
|align="center"|36.1
|align="center"|25.6
|align="center"|37.6
|align="center"|32.7
|-
|2007
|align="center"|27.9<sup>*</sup>
|align="center"|43.3
|align="center"|43.6
|align="center"|36.2
|align="center"|28.3
|align="center"|36.6
|align="center"|39.8<sup>*</sup>
|-
|2011
|align="center"|27.6<sup>+</sup>
|align="center"|42.9
|align="center"|44.2
|align="center"|37.1
|align="center"|25.1
|align="center"|35.5
|align="center"|33.6<sup>+</sup>
|}


==Components of taxation==
::::::<sup>*</sup> 2006 ; <sup>+</sup> 2010


===Personal income tax===
(Source OECD revenue statistics (2008)[http://www.oecd.org/document/58/0,3343,en_2649_34533_39498298_1_1_1_37427,00.html])
Personal income tax accounts for about 25 per cent of the average tax receipts of the OECD countries. Taxable income is defined in a variety of ways, with many different allowances, exemptions and deductions. Tax rates are generally progressive, usually starting after  a tax-free range for the lowest incomes, and followed by a sequence of higher rates as successive "thresholds" are exceeded, to reach maximum (and marginal) rates that are mostly between 40 per cent and 60 per cent <ref name=OECD>[http://www.oecd.org/document/60/0,3343,en_2649_34533_1942460_1_1_1_37427,00.html#pir OECD Tax Database, 2009]</ref>. Income from investments and income from employment are sometimes treated differently and there is sometimes special treatment for the elderly. The total "tax wedge" between employees' take-home pay and total labour costs to employers (including employee and employer social security contributions) ranges for most OECD countries to between 25 and 50 per cent of employers labour costs. <ref name=wedge> ''Taxing Wages 2007/2008'' Table 01  OECD, 2008 Edition[http://www.oecd.org/document/6/0,3343,en_2649_34533_42714758_1_1_1_1,00.html#table_01]</ref>


===Corporate income tax===
==The [[tax wedge]]  ==
Corporate income tax accounts for about 11 per cent of the average tax receipts of the OECD countries and tax rates are mainly between 15 per cent and 35 percent <ref name=OECD/>. As for personal taxation, many different ways of defining taxable income have been adopted<ref>[http://www.ifs.org.uk/docs/meade.pdf, see ''The Structure and Reform of Direct Taxation'', (the Meade Report), chapter 12, page 227]</ref>,  often with allowances for depreciation or research and development and with  "tax breaks" for selected commercial activities, and with special treatment of small busineses<ref>[http://www.oecd.org/dataoecd/52/25/39597756.pdf ''Survey on the Taxation of Small and Medium Sized Enterprises'' OECD, 2007]</ref>. In principle there are also the options of "source-based", "residence-based" or "destination-based" systems (ie related to the location of the parent company, residence of the investor or the location of the final sale).
(Taxation as a percentage of total labour costs, 2008)
:::{|class = "wikitable"
!align="center"|&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Japan&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
!align="center"|&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Italy&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
!align="center"|&nbsp;&nbsp;&nbsp; France&nbsp;&nbsp;&nbsp;
!align="center"|&nbsp;&nbsp; Germany &nbsp;&nbsp;
!align="center"| United States
!align="center"| United Kingdom
|-
|align="center"|29.5
|align="center"|46.5
|align="center"|49.3
|align="center"|52
|align="center"|30.1
|align="center"|32.8
|}


===Taxes on consumption===
(Source: OECD Taxing Wages 2007/2008 [http://www.oecd.org/document/6/0,3343,en_2649_34533_42714758_1_1_1_1,00.html#table_01]
Taxes on consumption (also known as "indirect taxes") have generally been increasing in recent years <ref>[http://www.oecd.org/dataoecd/45/6/39495382.pdf ''Consumption Taxes: the Way of the Future?'', OECD Policy Brief, October 2007]</ref>, and now account for about 25 per cent of the average tax receipts of the OECD countries. They include
* sales taxes (mainly in the US);
* value added tax - that is immediately paid on purchases at all stages of the supply chain, but subsequently deducted at all stages except purchases by  the final consumer (in use in all OECD countries except the US);
* excise taxes - that are paid only on purchases of specified categories of product, such as tobacco and alcohol and petrol;
* tariffs - that are paid on imported goods (mainly agricultural products).
It is common practice to exempt commodities on which poor people spend relatively high proportions of their income, such as food and childrens'clothing.


===Social security contributions===
==The changing composition of taxation==
Social security contributions account for about 24 per cent of the average tax receipts of the OECD countries. They include employees and employers contributions toward: -
(OECD averages, % of total tax receipts)
*  unemployment insurance benefits;
:::{|class = "wikitable"
*  accident, injury and sickness benefits;
!
*  old-age, disability and survivors’ pensions;
!&nbsp;&nbsp;1965&nbsp;&nbsp;
*  family allowances: and,
!&nbsp;&nbsp;1985&nbsp;&nbsp;
*  reimbursements for medical and hospital expenses or provision of hospital or medical services.
!&nbsp;&nbsp;2006&nbsp;&nbsp;
The total of employees' and employers social security contributions amounts for most OECD countries to between 10 and 30 per cent of employers' labour costs<ref name=wedge/>.
|-
!Personal income tax
|align="center"|30
|align="center"|30
|align="center"|25
|-
!Corporation income tax
|align="center"|9
|align="center"|8
|align="center"|11
|-
!Employees' social security contributions
|align="center"|6
|align="center"|7
|align="center"|9
|-
!Employers' social security contributions
|align="center"|10
|align="center"|13
|align="center"|15
|-
!Payroll tax
|align="center"|1
|align="center"|1
|align="center"|1
|-
!General consumption tax
|align="center"|14
|align="center"|16
|align="center"|19
|-
!Specific consumption taxes
|align="center"|24
|align="center"|16
|align="center"|11
|}
Source:OECD (2008) Revenue Statistics[http://www.oecd.org/document/58/0,3343,en_2649_34533_39498298_1_1_1_37427,00.html]<br>
See also the OECD's tax database[http://www.oecd.org/ctp/taxdatabase]


===Taxes on wealth and property===
==High-earners' marginal tax rates==
The principal categories of redistributive taxes on property and personal wealth are:
(marginal rates for employees earning 250% of average earnings - percent)
* Taxes on fixed property (real estate)
* Taxes on net wealth and capital gains
* Estate duty, inheritance tax, gift tax
* Taxes on financial and capital transactions


===Environmental taxation===
:::{|class = "wikitable"
Among the taxes that have been adopted in pursuit of environmental objectives are:
!
* Taxes on energy use.&nbsp; European Union law requires member states  to use "financial instruments" to bring about reductions in the use of energy in pursuit of a target reduction of 9 per cent over a period of 9 years <ref>[http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2006:114:0064:0064:EN:PDF  European Council Directive 2006/32/EC]</ref>. Implementation is being attempted partly by taxation<ref>[http://www.rec.org/REC/Programs/SofiaInitiatives/EcoInstruments/GreenBudget/GreenBudget6/carbon.html ''A Review of Carbon and Energy Taxes in EU'']</ref> - for example, the UKs Climate Change Levy<ref>[http://www.olis.oecd.org/olis/2008doc.nsf/LinkTo/NT0000B266/$FILE/JT03269927.PDF Rolf Martin and Ulrich Wagner: ''Econometric Analysis of the Impact of the UK Climate Change Levy'', OECD, September 2009]</ref>
!align="center"|&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Italy&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
* Carbon taxes.&nbsp; Taxes design to reduce the emission of carbon dioxide and other "greenhouse gases" have been introduced in a number of European and Commonwealth countries and in some member states of the United States, but  "tradable permit" schemes  provide an alternative that is widely favoured<ref>[http://www.olis.oecd.org/olis/2007doc.nsf/LinkTo/NT00005FF2/$FILE/JT03247683.PDF Stephen Smith ''Environmentally Related Taxes and Tradable Permit Systems in Practice'', OECD June 2008]</ref>,
!align="center"|&nbsp;&nbsp;&nbsp; France&nbsp;&nbsp;&nbsp;
* Landfill taxes.&nbsp;  European law sets limits upon the amount of  biodegradable municipal  waste that member states may send to landfill sites <ref>[http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:1999:182:0001:0019:EN:PDF EU Council Directive 1999/31/EC]</ref>.
!align="center"|&nbsp;&nbsp; Sweden &nbsp;&nbsp;
!align="center"| United States
!align="center"| United Kingdom
|-
!1981/2
|align="center"|13.5
|align="center"|22.5
|align="center"|44.0
|align="center"|27.6
|align="center"|12.5
|-
!2005/6
|align="center"|16.0
|align="center"|15.3
|align="center"|25.0
|align="center"|13.0
|align="center"|18.0
|}


==References==
(Source: OECD ''Taxing Wages 2007/2008.2008 edition ''[http://www.oecd.org/document/6/0,3343,en_2649_34533_42714758_1_1_1_1,00.html])
 
<references/>

Latest revision as of 08:47, 9 December 2012

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https://en.citizendium.org/wiki/index.php?title=Taxation/Addendum&printable=yes
This addendum is a continuation of the article Taxation.

The tax burden

(According to the OECD definition of tax revenues  % of GDP)

     Japan            Italy           France       Germany    United States United Kingdom       OECD      
1985 27.5 33.6 42.8 36.1 25.6 37.6 32.7
2007 27.9* 43.3 43.6 36.2 28.3 36.6 39.8*
2011 27.6+ 42.9 44.2 37.1 25.1 35.5 33.6+
* 2006 ; + 2010

(Source OECD revenue statistics (2008)[1])

The tax wedge

(Taxation as a percentage of total labour costs, 2008)

     Japan            Italy           France       Germany    United States United Kingdom
29.5 46.5 49.3 52 30.1 32.8

(Source: OECD Taxing Wages 2007/2008 [2]

The changing composition of taxation

(OECD averages, % of total tax receipts)

  1965     1985     2006  
Personal income tax 30 30 25
Corporation income tax 9 8 11
Employees' social security contributions 6 7 9
Employers' social security contributions 10 13 15
Payroll tax 1 1 1
General consumption tax 14 16 19
Specific consumption taxes 24 16 11

Source:OECD (2008) Revenue Statistics[3]
See also the OECD's tax database[4]

High-earners' marginal tax rates

(marginal rates for employees earning 250% of average earnings - percent)

      Italy           France       Sweden    United States United Kingdom
1981/2 13.5 22.5 44.0 27.6 12.5
2005/6 16.0 15.3 25.0 13.0 18.0

(Source: OECD Taxing Wages 2007/2008.2008 edition [5])

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