<p>I am not sure how you calculated the tax revenue in relation to GDP, but one measure would be tax revenue as % of GDP. This is quite common measure of how heavy the taxation is because it tells you what percentage of total output produced by country is collected by government. OECD provides data on this measure <a href="https://data.oecd.org/tax/tax-revenue.htm" rel="nofollow noreferrer">here</a>. </p>

<p>However, it can always happen that even a country with high tax rate collects less taxes than country with lower tax rate. First, you have classic Laffer curve - if you set taxes to 100% you collect zero tax revenue because nobody will work for fee so you collect the same tax as at 0 tax rate - hence having higher tax rates does not necessarily mean higher tax revenue. This being said empirically most real life countries don’t have taxes so high as to be over the peak of the Laffer curve so this will probably not apply to your case. Another, issue is tax avoidance. In some countries it’s child’s play to avoid VAT or many people can work in informal sector to avoid income tax. If government does not have good institutions that prevent this then again even government with 50% tax rate can collect less tax revenue than government with 10% tax rate if in second country tax authorities are efficient in preventing tax avoidance but in first country not. </p>

<p>Another possible measure could be looking at average or marginal tax rate across the economy and compare these between two countries. However, this is just crude comparison of how high taxes are.</p>

<p>If you would care about comparing the burdens the tax systems in the two countries create then a good measure is the marginal cost of public funds or marginal excess burden of taxation. This is a measure of by how much government must reduce economic activity (by its distortionary taxes) to extract 1 euro (or local currency). For example marginal marginal excess burden of  0.5 would imply that to raise 1e in tax revenue output on margin contracts by additional 0.5e so in total government has to take “out” of the economy 1.5e to get 1e. This gives you some idea of distortionary effect of taxes (in case of no distortions the marginal excess burden should be 0e). </p>

<p>You can also calculate average excess burden which is the same measure but it gives you information about average burden instead of burden at the margin (i.e. the last euro collected). I don’t know of any dataset that just gives you this measure though because it has to be estimated and based on different estimation techniques or assumptions behind the model used you can get little bit different values, but you can try to search for it in google scholar. For US there are many papers trying to estimate the excess burden of almost any tax you can think of, but if you come from small country research might be not available on this.</p>

CC BY-SA 4.0
2020-01-25T13:03:47.760Z
Argentina is not on that OECD page, so it won't help the OP much verify his calculation.
fantastic peace and prosperity
CC BY-SA 4.0
2020-01-25T13:05:53.937Z
@Fizz how do you know OP is looking for Argentina?
1muflon1
CC BY-SA 4.0
2020-01-25T13:10:52.637Z
He says "my country" and his profile indicates that is Argentina.
fantastic peace and prosperity
CC BY-SA 4.0
2020-01-25T13:12:22.487Z
@Fizz oh that’s a good catch
1muflon1
CC BY-SA 4.0
2020-01-25T10:22:10.607Z
2020-01-25T10:22:10.607Z
1muflon1
<p>You have to make sure you use the same source of tax data for a meaningful comparison because it matters what is included in that total tax revenue and what isn't.</p>

<p>1muflon1 suggested using OECD data which at least on that page doesn't have Argentina. The IMF data <a href="https://data.worldbank.org/indicator/GC.TAX.TOTL.GD.ZS?contextual=default&amp;locations=AR-US-DK" rel="nofollow noreferrer">available</a> through World Bank does have it, but my point is that if you compare the two graphs below on the common countries (US, Denmark) you'll immediately see the problem that can happen if you source the tax data from different data sets...</p>

<p><a href="https://i.sstatic.net/qxV5y.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/qxV5y.png" alt="enter image description here"></a></p>

<p><a href="https://i.sstatic.net/yrshA.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/yrshA.png" alt="enter image description here"></a></p>

<p>(Black line is OECD average in the latter graph.)</p>

<p>OECD does have the data for Argentina <a href="https://stats.oecd.org/Index.aspx?DataSetCode=RSLACT#" rel="nofollow noreferrer">in a table somewhere</a> and it's around 30% for 2017 using their methodology (somewhat above the US). Caveat lector. A bit more digging even found an OECD-produced <a href="https://www.oecd-ilibrary.org/sites/d9c9ed3e-en/index.html?itemId=/content/component/d9c9ed3e-en#figure-d1e1182" rel="nofollow noreferrer">graph</a> that has both the US and Argentina, but it's only for one year (2017). From the OECD table (as well as IMF data graphed above) Argentina indeed has experience and increase in taxation in the past decade. (I guess they "learned how to tax", which was often a complaint (that they didn't) against Argentina <a href="https://www.jstor.org/stable/30130826" rel="nofollow noreferrer">a decade ago</a>.)</p>

<p><a href="https://i.sstatic.net/rTf0q.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/rTf0q.png" alt="enter image description here"></a></p>

<p>As discussed in the OECD page that has this last figure, countries with low GDP per capita tend to have lower taxation (as share of GDP). Relative to its GDP per capita bracket, Argentina does have a bit higher taxes (and the opposite is true for the US).</p>

<p><a href="https://i.sstatic.net/P9l5f.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/P9l5f.png" alt="enter image description here"></a></p>

<p>(The GDP of Ireland and Luxembourg are <a href="https://en.wikipedia.org/wiki/Tax_haven#Inflated_GDP-per-capita" rel="nofollow noreferrer">inflated</a> with some corporate tax scheming, in case you wonder why they are so far to the right in that last graph...)</p>

<p>Also from that source, Argentina doesn't rely on personal income taxes much for its tax revenues. What Argentina <a href="https://growthlab.cid.harvard.edu/files/growthlab/files/2019-09-cid-fellows-wp-117-tax-avoidance-buenos-aires.pdf" rel="nofollow noreferrer">is famous</a> for (not sure if this has been reformed in the lastest packages)...</p>

<blockquote>
  <p>Taxes have always been a major concern for businesses in Argentina. According to the
  World Bank Enterprise Surveys, in the year 2017 over 36% of the firms in the country, three
  times more than the Latin American average, chose Tax Rates as their biggest business
  obstacle, and almost 80% of them identify taxes as a major constraint. For the subset
  of firms in the City of Buenos Aires, these numbers are even larger. The World Bank
  Doing Business Indicators also report taxes as the least friendly factor in doing business in
  Argentina. Nominal and effective rates are much higher than the region’s median, and total
  taxes and contributions (i.e. social security) are estimated to exceed 100% of the profits. Half
  of this burden is attributable to municipal taxes, led by the Gross Income tax (in Spanish,
  and henceforth, Ingresos Brutos).</p>
  
  <p>Ingresos Brutos emerged in 1948 to simplify and modernize the tax system, but rapidly
  evolved into a policy instrument: a response to the Argentine federal government dictating
  and changing the revenues from national tax collection that each province would get. It is
  today the main source of income for the provinces and the City of Buenos Aires (henceforth
  City), an autonomous municipality similar to a federal district. It accounts for over 70% of
  tax revenues in both the City and the Province of Buenos Aires (henceforth Province), is
  quite invisible to the final consumer (as opposed to a sales tax), and easy to collect. Ingresos
  Brutos is, however, like gross income tax anywhere else, very unpopular for being a cascade
  tax, regressive, and not indexed for inflation. It is also non-neutral and distorts economic
  incentives, like promoting vertical integration for fiscal motives.</p>
</blockquote>

<p>So this explains why Argentina seem among the top countries <a href="https://data.worldbank.org/indicator/IC.TAX.TOTL.CP.ZS?contextual=region&amp;locations=AR-US" rel="nofollow noreferrer">in that indicator</a> (total corporate tax as percent of profit--a gross income tax allows over 100% of the profit to be taxed.)</p>

<p>An OECD assesment <a href="https://www.oecd-ilibrary.org/sites/9789264311695-8-en/index.html?itemId=/content/component/9789264311695-8-en" rel="nofollow noreferrer">agrees</a>:</p>

<blockquote>
  <p>the provincial turnover tax (Impuesto sobre los ingresos brutos) is under the full responsibility of the provinces. This turnover tax is particularly distorting because it is levied on sales at every stage in the supply chain, without any deduction for the tax paid in earlier stages. This creates incentives for vertical integration and for avoiding the inter-provincial addition of value, and it acts like an interprovincial tariff barrier.</p>
</blockquote>

<p>So yeah, you can have "bad" taxes in other ways than merely overall burden... (This latter source also discusses the export taxes as having mixed effects.)</p>

CC BY-SA 4.0
2020-01-25T14:00:52.033Z
2020-01-25T16:48:23.750Z
2020-01-25T16:48:23.750Z
fantastic peace and prosperity
<p>In my country we are told often that the tax pressure over the companies and people is huge, making it unbearable and being a reason bankrupting the Economy, and one of the largests in the world. We are told that each product price is more than 50% of taxes and each company has to pay more than 50% in taxes for each employee they have. But when I take a look at the overall amount of money collected by taxes in a year, this seems to be over 100 times smaller than United States, a supposed very capitalist country which opposes heavy taxation. Of course we have to take in consideration other parameters, such how large are the economies of each country, but if I compare the amount of money collected with taxes in relation with the GDP of each country, it would seem my country pays half of the taxes of United States (100 times less taxes with 50 times less GDP than US) . I thought that may be I should compare people's wages with the amount of taxes divided the amount of people, but it still seems that United States is paying over twice the taxes that we pay here. </p>

<p>Then, because of all of this, my question is, </p>

<p>Is there an index, parameter, ecuation, or anything to compare the tax pressure exercised by a country to its own Economy in relation to the pressure exercised by others countries?</p>

<mathematical-economics><taxation>
Is there an index, parameter, ecuation, or anything to compare the tax pressure exercised by a country in relation to others countries?
Pablo
# Is there an index, parameter, ecuation, or anything to compare the tax pressure exercised by a country in relation to others countries?

(Asked by: username_0 on 2020-01-24)

In my country we are told often that the tax pressure over the companies and people is huge, making it unbearable and being a reason bankrupting the Economy, and one of the largests in the world. We are told that each product price is more than 50% of taxes and each company has to pay more than 50% in taxes for each employee they have. But when I take a look at the overall amount of money collected by taxes in a year, this seems to be over 100 times smaller than United States, a supposed very capitalist country which opposes heavy taxation. Of course we have to take in consideration other parameters, such how large are the economies of each country, but if I compare the amount of money collected with taxes in relation with the GDP of each country, it would seem my country pays half of the taxes of United States (100 times less taxes with 50 times less GDP than US) . I thought that may be I should compare people's wages with the amount of taxes divided the amount of people, but it still seems that United States is paying over twice the taxes that we pay here.

Then, because of all of this, my question is,

Is there an index, parameter, ecuation, or anything to compare the tax pressure exercised by a country to its own Economy in relation to the pressure exercised by others countries?

**Tags:** mathematical-economics, taxation


---

## 2 answers

### Answer by username_1 on 2020-01-25. Score: 1

I am not sure how you calculated the tax revenue in relation to GDP, but one measure would be tax revenue as % of GDP. This is quite common measure of how heavy the taxation is because it tells you what percentage of total output produced by country is collected by government. OECD provides data on this measure [here](https://data.oecd.org/tax/tax-revenue.htm).

However, it can always happen that even a country with high tax rate collects less taxes than country with lower tax rate. First, you have classic Laffer curve - if you set taxes to 100% you collect zero tax revenue because nobody will work for fee so you collect the same tax as at 0 tax rate - hence having higher tax rates does not necessarily mean higher tax revenue. This being said empirically most real life countries don’t have taxes so high as to be over the peak of the Laffer curve so this will probably not apply to your case. Another, issue is tax avoidance. In some countries it’s child’s play to avoid VAT or many people can work in informal sector to avoid income tax. If government does not have good institutions that prevent this then again even government with 50% tax rate can collect less tax revenue than government with 10% tax rate if in second country tax authorities are efficient in preventing tax avoidance but in first country not.

Another possible measure could be looking at average or marginal tax rate across the economy and compare these between two countries. However, this is just crude comparison of how high taxes are.

If you would care about comparing the burdens the tax systems in the two countries create then a good measure is the marginal cost of public funds or marginal excess burden of taxation. This is a measure of by how much government must reduce economic activity (by its distortionary taxes) to extract 1 euro (or local currency). For example marginal marginal excess burden of 0.5 would imply that to raise 1e in tax revenue output on margin contracts by additional 0.5e so in total government has to take “out” of the economy 1.5e to get 1e. This gives you some idea of distortionary effect of taxes (in case of no distortions the marginal excess burden should be 0e).

You can also calculate average excess burden which is the same measure but it gives you information about average burden instead of burden at the margin (i.e. the last euro collected). I don’t know of any dataset that just gives you this measure though because it has to be estimated and based on different estimation techniques or assumptions behind the model used you can get little bit different values, but you can try to search for it in google scholar. For US there are many papers trying to estimate the excess burden of almost any tax you can think of, but if you come from small country research might be not available on this.

> **Comments:**
> **username_2**: Argentina is not on that OECD page, so it won't help the OP much verify his calculation.  
> **username_1**: @Fizz how do you know OP is looking for Argentina?  
> **username_2**: He says "my country" and his profile indicates that is Argentina.  
> **username_1**: @Fizz oh that’s a good catch  

---

### Answer by username_2 on 2020-01-25. Score: 1

You have to make sure you use the same source of tax data for a meaningful comparison because it matters what is included in that total tax revenue and what isn't.

username_1 suggested using OECD data which at least on that page doesn't have Argentina. The IMF data [available](https://data.worldbank.org/indicator/GC.TAX.TOTL.GD.ZS?contextual=default&locations=AR-US-DK) through World Bank does have it, but my point is that if you compare the two graphs below on the common countries (US, Denmark) you'll immediately see the problem that can happen if you source the tax data from different data sets...

[![enter image description here](https://i.sstatic.net/qxV5y.png)](https://i.sstatic.net/qxV5y.png)

[![enter image description here](https://i.sstatic.net/yrshA.png)](https://i.sstatic.net/yrshA.png)

(Black line is OECD average in the latter graph.)

OECD does have the data for Argentina [in a table somewhere](https://stats.oecd.org/Index.aspx?DataSetCode=RSLACT#) and it's around 30% for 2017 using their methodology (somewhat above the US). Caveat lector. A bit more digging even found an OECD-produced [graph](https://www.oecd-ilibrary.org/sites/d9c9ed3e-en/index.html?itemId=/content/component/d9c9ed3e-en#figure-d1e1182) that has both the US and Argentina, but it's only for one year (2017). From the OECD table (as well as IMF data graphed above) Argentina indeed has experience and increase in taxation in the past decade. (I guess they "learned how to tax", which was often a complaint (that they didn't) against Argentina [a decade ago](https://www.jstor.org/stable/30130826).)

[![enter image description here](https://i.sstatic.net/rTf0q.png)](https://i.sstatic.net/rTf0q.png)

As discussed in the OECD page that has this last figure, countries with low GDP per capita tend to have lower taxation (as share of GDP). Relative to its GDP per capita bracket, Argentina does have a bit higher taxes (and the opposite is true for the US).

[![enter image description here](https://i.sstatic.net/P9l5f.png)](https://i.sstatic.net/P9l5f.png)

(The GDP of Ireland and Luxembourg are [inflated](https://en.wikipedia.org/wiki/Tax_haven#Inflated_GDP-per-capita) with some corporate tax scheming, in case you wonder why they are so far to the right in that last graph...)

Also from that source, Argentina doesn't rely on personal income taxes much for its tax revenues. What Argentina [is famous](https://growthlab.cid.harvard.edu/files/growthlab/files/2019-09-cid-fellows-wp-117-tax-avoidance-buenos-aires.pdf) for (not sure if this has been reformed in the lastest packages)...

> Taxes have always been a major concern for businesses in Argentina. According to the
> World Bank Enterprise Surveys, in the year 2017 over 36% of the firms in the country, three
> times more than the Latin American average, chose Tax Rates as their biggest business
> obstacle, and almost 80% of them identify taxes as a major constraint. For the subset
> of firms in the City of Buenos Aires, these numbers are even larger. The World Bank
> Doing Business Indicators also report taxes as the least friendly factor in doing business in
> Argentina. Nominal and effective rates are much higher than the region’s median, and total
> taxes and contributions (i.e. social security) are estimated to exceed 100% of the profits. Half
> of this burden is attributable to municipal taxes, led by the Gross Income tax (in Spanish,
> and henceforth, Ingresos Brutos).
>
> Ingresos Brutos emerged in 1948 to simplify and modernize the tax system, but rapidly
> evolved into a policy instrument: a response to the Argentine federal government dictating
> and changing the revenues from national tax collection that each province would get. It is
> today the main source of income for the provinces and the City of Buenos Aires (henceforth
> City), an autonomous municipality similar to a federal district. It accounts for over 70% of
> tax revenues in both the City and the Province of Buenos Aires (henceforth Province), is
> quite invisible to the final consumer (as opposed to a sales tax), and easy to collect. Ingresos
> Brutos is, however, like gross income tax anywhere else, very unpopular for being a cascade
> tax, regressive, and not indexed for inflation. It is also non-neutral and distorts economic
> incentives, like promoting vertical integration for fiscal motives.

So this explains why Argentina seem among the top countries [in that indicator](https://data.worldbank.org/indicator/IC.TAX.TOTL.CP.ZS?contextual=region&locations=AR-US) (total corporate tax as percent of profit--a gross income tax allows over 100% of the profit to be taxed.)

An OECD assesment [agrees](https://www.oecd-ilibrary.org/sites/9789264311695-8-en/index.html?itemId=/content/component/9789264311695-8-en):

> the provincial turnover tax (Impuesto sobre los ingresos brutos) is under the full responsibility of the provinces. This turnover tax is particularly distorting because it is levied on sales at every stage in the supply chain, without any deduction for the tax paid in earlier stages. This creates incentives for vertical integration and for avoiding the inter-provincial addition of value, and it acts like an interprovincial tariff barrier.

So yeah, you can have "bad" taxes in other ways than merely overall burden... (This latter source also discusses the export taxes as having mixed effects.)


---

