Australian Government CrestInternational Comparison of Taxes

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12. Selected Asian economies


The approaches to taxation in the Asian economies often differ significantly from the standard practice in the OECD-10. A number of the Asian economies show a strong dependence on company tax (in 2002 Malaysia collected 8.9 per cent of GDP and Vietnam collected 6.9 per cent) well in excess of the OECD-10 unweighted average of 3.4 per cent of GDP.

Whilst Malaysia and Singapore have a mix of direct and indirect taxes which is broadly consistent with OECD practice, a number of the Asian economies (for example, Thailand, Cambodia and Myanmar) rely much more heavily on indirect taxes.

The amount of direct and indirect tax revenue collected as a percentage of GDP for the selected Asian economies does not exceed 18 per cent in 2002. In contrast, in 2003 the OECD-30 unweighted average of tax revenue to GDP was 36.3 per cent. Many of the Asian economies have a significant proportion of their total revenue as non-tax revenue.

The average total outlays for the Asian economies tend to be substantially lower than those of the OECD-10, reflecting the fact that many of the Asian economies are still developing. For instance, Thailand recorded outlays of 19.9 per cent of GDP in 2004, while the unweighted average for the OECD-10 was 38.6 per cent of GDP.

The issues outlined above reduce the value of attempting to compare the Asian economies with OECD countries. In addition, the quality of the data available for the Asian economies is relatively low. In many instances the data which would be required to draw useful comparisons are not available.

12.1 Introduction

This chapter contains a range of measures of taxation which mirror aspects of the taxation regimes examined across the OECD-10. In broad terms the chapter illustrates some important variations exhibited by the selected Asian economies (Hong Kong, Malaysia, Singapore and Taiwan) in their approaches to taxation relative to the OECD-10. The significance of these variations constrain the usefulness of assessing the importance of differences between the taxation regimes in Asian economies and that of other OECD countries.

A key constraint in examining the selected Asian economies is the availability and quality of data. Available data has been generally sourced from the International Monetary Fund (IMF) Government Finance Statistics publication which utilises different categories and methodologies to that used by the OECD. The data coverage is very mixed, with key items not included in source tables (for instance, source tables did not allow a comparison of the current total level of government outlays between Asian economies). Where available, data on a wider range of Asian economies have been utilised in producing the charts in this chapter.

The chapter briefly maps out the widely variable approach to the mix of taxation revenue collected amongst the Asian economies. A key finding is that they generally rely on indirect taxes to a far greater extent than OECD countries. There is also a tendency for some of the Asian economies to rely heavily on corporate tax compared to the OECD-10 unweighted average.

Government expenditures as a proportion of GDP are much higher in developed economies, including developed non-OECD economies in the Asian region, than they are in developing economies. Given that citizens in advanced industrial democracies tend to demand greater social expenditure by government, it should be expected that aggregate level comparisons would point to lower government expenditure, and lower taxation, in developing economies when compared with a developed economy such as Australia.

The level of taxation collected by these countries, and their tax burden as a proportion of GDP are generally consistent with the stages of development of many of these economies. Most are relatively poor in comparison to OECD countries, and their relatively low level of tax burden is consistent with this characteristic.


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