Social democrats generally favor higher levels of taxation to fund public provision of a wide range of services such as universal health care and education, as well as the provision of a range of welfare benefits.
The visualization shows a map of total tax revenues. These estimates come from the International Centre for Tax and Development, and are expressed as a share of GDP.
Wikipedia: A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or national), and tax compliance refers to policy actions and individual behavior aimed at ensuring that taxpayers are paying the right amount of tax at the right time and securing the correct tax allowances and tax reliefs.
A failure to pay in a timely manner (non-compliance), along with evasion of or resistance to taxation, is punishable by law. Taxes consist of direct or indirect taxes and may be paid in money or as its labor equivalent.
Most countries have a tax system in place, in order to pay for public, common, or agreed on national needs and for the functions of government. Some levy a flat percentage rate of taxation on personal annual income, but most scale taxes are progressive based on brackets of annual income amounts. Most countries charge a tax on an individual’s income as well as on corporate income. Countries or subunits often also impose wealth taxes, inheritance taxes, estate taxes, gift taxes, property taxes, sales taxes, use taxes, payroll taxes, duties, and/or tariffs.
In economic terms, taxation transfers wealth from households or businesses to the government. This has effects that can both increase and reduce economic growth and economic welfare. Consequently, taxation is a highly debated topic.
According to most political philosophies, taxes are justified as they fund activities that are necessary and beneficial to society. Additionally, progressive taxation can be used to reduce economic inequality in a society. According to this view, taxation in modern nation-states benefits the majority of the population and social development. A common presentation of this view, paraphrasing various statements by Oliver Wendell Holmes Jr. is “Taxes are the price of civilization”.
Every tax, however, is, to the person who pays it, a badge, not of slavery, but of liberty.– Adam Smith (1776), Wealth of Nations
How much tax revenue do countries collect today?
As we can see from the most recent data, at one extreme of the spectrum we have countries such as Cuba, France, Denmark, Norway, and Sweden, where total tax revenues are higher than 30%. And at the other extreme, we have countries such as Libya and Saudi Arabia, where taxes account for less than 2% of national income.
More generally, this map shows that there is a clear correlation between GDP and tax revenues – richer countries tend to collect through taxes a much larger share of their domestic production. This is a remark that we address in more detail in the following sections.
The visualization uses the same data but plots the evolution of tax revenues for individual countries. You can add countries by clicking on the option ‘ Add country ’; and you can switch between the ‘map’ and ‘chart’ views by clicking on the tabs at the top of the graph.
The time series show that most high-income countries have had relatively stable levels of tax revenues in the last decade; while trends and patterns are less clear across the developing world. In many cases, especially among upper-middle-income countries, tax revenues have been going up consistently. The case of Turkey stands out: in 1980 it collected about 13.5% of GDP in taxes (about half of the US), yet by 2001 it had nearly doubled tax revenues – almost catching up with the US.
Statement by President Joe Biden on Juli 1. 2021 Agreement of 130 Countries to Support a Global Minimum Tax for the World’s Largest Corporations
Today marks an important step in moving the global economy forward to be more equitable for workers and middle-class families in the United States and around the world. I want to thank all the signatories of the Paris OECD statement — 130 countries — for coming together to endorse a global minimum tax rate of at least 15 percent. These nations make up more than 90 percent of the world’s economy, which puts us in striking distance of full global agreement to halt the race to the bottom for corporate taxes.
With a global minimum tax in place, multinational corporations will no longer be able to pit countries against one another in a bid to push tax rates down and protect their profits at the expense of public revenue. They will no longer be able to avoid paying their fair share by hiding profits generated in the United States, or any other country, in lower-tax jurisdictions. This will level the playing field and make America more competitive. And it will allow us to devote the additional revenue we raise to making generational investments, which are necessary to keep America’s competitive edge razor-sharp in today’s global economy.
I promised to lead the world to deliver a foreign policy for the middle class, and today, we are doing just that.
Reaching this consensus wasn’t easy. It took the American vision, as well as a commitment to closely cooperate with our partners around the world. It’s a testament to how leadership rooted in our values can deliver important progress for families everywhere.
Building on this agreement will also require us to take action here at home. It’s imperative that we reform our own corporate tax laws, as I proposed in my Made in America tax plan. We must adopt the global minimum tax, among other measures I have proposed, to make sure corporations pay their fair share. Congress should pass my Made in America tax plan to bring good-paying jobs home and make sure our tax code works for families, workers, and small businesses, not just profitable corporations and billionaires.
I commend Secretary Yellen for her efforts championing these discussions and look forward to continued productive negotiations. I look forward to the full agreement in the fall.