Tax policies vary widely from country to country across the Organization for Economic Co-operation and Development, according to an OECD study released today.

The ways in which governments raise money through taxation continue to vary widely across the OECD the report notes, with Denmark collecting almost 60% of its revenues from personal and corporate taxes and France less than 25%.

In North America, Mexico collects more than half of its tax revenue from taxes on the sales of goods and services while the United States raises less than a fifth of its revenue from this source. Corporate and personal income tax accounts for 46% of Canada’s revenue, followed by consumption taxes at 26.1%, social security taxes represent 15.4% of revenue, property taxes are 10.0%, and payroll taxes are 2.1%.

At regional and local level, different patterns are also visible. While most countries use a mix of state and local taxes to finance sub-national government, Ireland and the United Kingdom rely exclusively on local property taxes and Sweden exclusively on local income tax. “Such differences reflect national choices with regard to taxation which in turn are determined by economic and social priorities,” the OECD explains.

In 2004, the OECD publication reveals, Sweden once again had the highest tax-to-GDP ratio among OECD countries, at 50.7% against 50.6% in 2003. Denmark came next at 49.6% (48.3%), followed by Belgium at 45.6% (45.4%). At the other end of the scale, Mexico had the lowest tax-to-GDP ratio, at 18.5%, against 19.0% in 2003. Korea had the second lowest, at 24.6% (25.3%), and the United States had the third, at 25.4% (25.6%).

Canada’s tax-to-GDP ratio came in at 33.8% for 2003, and is predicted to slide to 33.0% in 2004. This is down from 35.6% in 2000, but up from 1975’s 31.9%.

Taking the 30-nation OECD area as a whole, the tax-to-GDP ratio calculated on an unweighted average basis fell marginally in 2003 – the latest year for which complete figures are available — to 36.3%, from 36.4% in 2002 and from a peak of 37.1% in 2000. In 1975, the average tax-to-GDP ratio was 30.3%.

The Netherlands showed the biggest percentage-point reduction in the overall share of taxation in its economy, with the tax-to-GDP ratio falling two percentage points to 39.3% of GDP in 2004 from 41.3% in 1975. In Spain, by contrast, the tax-to-GDP ratio jumped by almost 17 percentage points from 18.2% in 1975 to 35.1% in 2004.

“Recent changes in tax-to-GDP ratios in many countries have reflected the combined impact of changes in economic growth and lower rates of taxation on personal and corporate income,” the OECD said. The OECD average corporate tax rate fell from 33.6% in 2000 to 29.8% in 2004, while the average top personal income tax rates fell from 47.1% to 44.0%. “These resulted in marked falls in revenues between 2000 and 2002, when economic growth was sluggish, but a revival of economies in 2003 led to a recovery in revenues, thanks to the positive impact of growth on incomes and profits, and hence in the overall tax base,” it added.