Consumption Tax Trends provides information on Value Added Taxes/Goods and Services Taxes (VAT/GST) and excise duty rates in OECD member countries. It also contains information about international aspects of VAT/GST developments and the efficiency of this tax. It describes a range of other consumption taxation provisions on tobacco, alcoholic beverages, motor vehicles and aviation fuels.
Consumption Tax Trends 2024
VAT/GST and Excise, Core Design Features and Trends
Consumption Tax Trends
Abstract
Executive Summary
At 9.9% of GDP, revenue from consumption taxes in OECD countries remained stable in 2022 compared to 2020 (9.9%) and 2021 (10.0%). The overall share of consumption taxes in total tax revenues has fallen slightly to 29.6% in 2022, compared to 30% in 2021 and 30.1% in 2020. This decline is mainly attributable to the decreasing revenue importance of taxes on specific goods and services (mainly tobacco, alcoholic beverages and fuel, as well as certain environment-related taxes) as a percentage of total tax revenues in OECD countries on average. Value-added taxes (VAT) generated 20.8% of total revenue in OECD countries on average in 2022. VAT continues to be the largest category of consumption taxes, generating almost four times as much tax revenue as excise duties that form the bulk of taxes on specific goods and services, accounting for 5.6% of total tax revenue in 2022 on average.
Consumption tax-to-GDP ratios declined in 12 out of the 38 OECD countries between 2020 and 2022, increased in 22 countries while 4 countries saw no change. Consumption taxes produce more than 40% of total taxes in 5 OECD countries (Chile, Colombia, Hungary, Latvia, and Türkiye). They account for less than 20% of total taxes in 3 OECD countries (Japan, Switzerland, and the United States).
VAT revenues have slightly increased in OECD countries between 2020 and 2022 on average, at 7% as a share of GDP in 2022, up from 6.9% in 2021 and 6.7% in 2020. VAT accounts for more than one-fifth of total tax revenues (20.8%) on average, representing 20% or more of total taxes in 21 of the 37 OECD countries that operate a VAT. Seven countries saw a decline in VAT revenue as a share of GDP between 2020 and 2022, while 28 reported an increase and 2 saw no change. Decreases of 0.5 percentage points (p.p.) or more were recorded in Denmark (-0.6 p.p.), Norway (–2.5 p.p.) and Poland (-0.7 p.p.). The largest increases were seen in Germany (+1.0 p.p.), Greece (+1.2 p.p.), Chile (+1.4 p.p.), Italy and Latvia (+1.1 p.p.).
Revenues from taxes on specific goods and services, primarily excises, have further declined both as a percentage of GDP (to 2.8% in 2022; a decline of 0.3 percentage points compared to 2020) and as a percentage of total tax revenue (to 8.2% in 2022; down 1.1 p.p. since 2020).
Standard VAT rates across OECD countries slightly increased in 2024 at 19.3% on average, up from 19.1% in 2023 and 19.2% in 2022. Three OECD countries increased their standard VAT rates: Türkiye (from 18% to 20% in 2023), Estonia (from 20% to 22% in 2024), and Switzerland (from 7.7% to 8.1% in 2024). Temporary standard VAT rate reductions introduced by Germany and Ireland in 2020 in the context of the COVID‑19 pandemic, and by Luxembourg in 2023 to counter the effects of inflation, were removed.
All OECD countries that operate a VAT, except Chile, apply reduced VAT rates to various goods and services to pursue specific policy objectives, most often the promotion of equity (on food, health and hygiene products) and culture (on books, magazines and shows).
All OECD countries with a VAT have introduced rules that reflect the recommended OECD VAT standards on online sales of services and digital products from non-resident e-commerce vendors and marketplaces. Twenty-seven OECD countries (Australia, New Zealand, Norway, Switzerland, and the United Kingdom and the 22 countries that are Member States of the European Union) have expanded these e-commerce VAT regimes to include imports of low-value goods.
Digitalisation, and the resulting increased availability of data provide tax authorities with opportunities for greater access to VAT‑relevant information. Over the last decade, most OECD countries have implemented electronic transactional information reporting obligations. These requirements are heterogeneous across OECD countries, differing on aspects such as scope, data collected or frequency of reporting (systematic or on request). Seventeen out of the 35 countries requiring electronic transactional reporting require the systematic transmission of such information to the tax authorities and 11 of these countries require transmission in (near) real time. While the progressive digitalisation of invoices continues, and electronic invoicing is now permitted in all OECD countries, it is only mandatory (with a varying scope) in 29 of these countries.
Excise duties are used by OECD countries not only to raise revenue but also to influence customer behaviour where consumption is considered harmful to health or to the environment. All OECD countries apply excise duties to alcoholic beverages and tobacco products, but tax rates and structures vary widely. Aviation fuels are often exempt from taxes, particularly when used for commercial international flights.
Car taxation is increasingly aimed at influencing customer behaviour towards the use of low polluting vehicles. In 2024, almost all OECD countries consider environmental or fuel efficiency in determining the level of taxation for the purchase or use of vehicles, and 22 of these countries apply tax rebates or exemptions for electric or hybrid vehicles. In 2024, eight OECD countries provide a direct subsidy on the purchase of these vehicles. On the other hand, two countries have rescinded subsidies since 2022.
The VRR provides a comparative measure of the difference between the VAT revenue collected and what would theoretically be raised if VAT were applied at the standard rate to the entire potential tax base in a “pure” VAT regime. It provides an indicator that combines the effect of loss of revenues due to exemptions and reduced rates, fraud and non-compliance. Across the OECD, the unweighted average VRR has slightly increased in 2022 to 0.58, up from 0.55 in 2019 and 2020. The stability of the average VRR during the COVID‑19 pandemic contrasts with the significant decline of the average VRR during the Global Financial Crisis, from 0.59 in 2007 to 0.53 in 2009. The unweighted average VRR of 0.58 in 2022 suggests that, on average, an estimated 42% of the theoretical potential VAT revenue is not collected.
