Centre for Tax Policy and Administration Organisation for Economic Co-operation and Development OECD Consumption tax trends Maurice Nettley OECD Centre for Tax Policy and Administration September 2010

2 Consumption taxes  General consumption taxes - Value added taxes (VAT) and its equivalent in several jurisdictions, the Goods and Services tax (GST) - Sales taxes  Taxes on specific goods and services - Excise taxes levied on specific goods - Motor vehicle taxes - Custom duties and other taxes on insurance or financial operations

3 Overview of contents  Discussion of topical issues relating to consumption taxes  Reports on consumption tax yields in the OECD area - trends in tax to GDP ratios - trends in share of total tax ratios  Rates and structure of VAT in the OECD area  Some details of structure and tax rates for selected excise duties in OECD  Taxation of motor vehicles

Topical issues relating to consumption taxes Examples in the 2008 and 2010 publications relating to developments in the cross-border trade area  The path from the 1998 Ottawa Taxation Framework Conditions to the draft International VAT/GST guidelines  Need to avoid double taxation or double non-taxation  Draft VAT/GST guidelines released on the OECD website - Definition of the place of taxation for business to business internationally traded services and intangibles - This is a living document to be expanded in the future 4

Reports on consumption tax yields (1)  On average the breakdown of tax revenues in the OECD area in 2007 was as follows: - Personal income tax 25% - Corporate income tax 11% - Social security contributions 25% - Payroll taxes 1% - Property taxes 6% - General consumption taxes 19%)) 30% - Specific consumption taxes 11%)) - Other taxes 3% TOTAL 100% 5

Reports on consumption tax yields ( 2 )  Trends in share of total taxation to 2007 Consumption taxes total - Fell from 36 to 30% General consumption taxes - Rose from 12 to 19% Specific consumption taxes - Fell from 24 to 11%  Trends in tax to GDP ratios to 2007 Consumption taxes total - Rose from 9.1 to 10.3% General consumption taxes - Rose from 3.3 to 6.7% Specific consumption taxes - Fell from 5.8 to 3.5% 6

Rates and structure of VAT in the OECD area (1)  Evolution of VAT/GST rates in the OECD area over the past 30 years  Details of the use of lower rates, domestic zero rates and exemptions for specific goods and services  Details of annual turnover concessions for VAT/GST registration and collection  Existence of special VAT/GST taxation methods such as the use of the reverse charge scheme or margin schemes 7

Rates and structure of VAT in the OECD area (2)  Calculation of the VAT Revenue Ratios in OECD member countries  The VAT Revenue Ratio equals (VAT revenue)/ ([consumption – VAT revenue] * standard VAT rate)  Defined as the ratio between the actual VAT revenue collected and the revenue that would be collected if VAT was applied at the standard rate to all final consumption 8

Parameters of a selected range of excise taxes in OECD member countries (1) Details of tax rates and structure of the tax regimes for  Taxation of beer, wine and other alcoholic beverages  Tobacco products – cigarettes, cigars, cigarette rolling tobacco, pipe tobacco  Mineral oil products – leaded/unleaded petrol, diesel oil, heating oil and heavy fuel oil 9

Taxation of motor vehicles  Taxes on sale and registration of motor vehicles ( defined in most cases as a registration tax )  Periodic taxes in connection with the ownership of a vehicle ( defined in most cases as a circulation tax )  Taxes on fuel  Any other taxes and charges, such as insurance taxes and road tolls etc 10

Why is this an important publication?  A unique source of both information and internationally comparable data on consumption taxes – unique in terms of the range of countries covered.  Provides analyses of trends in tax yields.  Monitors the evolution of tax rates and the structure of consumption taxes.  It is an excellent tool for individual countries to assess their position relative to other countries on criteria such as VAT rates, registration thresholds, scope for exemptions and reduced rates.  The VAT Revenue Ratio enables a view of the different countries’ capacity to capture the potential tax base. 11

 Thank you and any questions? 12