Tax dollars make up lower-than-average share of Asia-Pacific economies: OECD report

TAX-TO-GROSS domestic product (GDP) ratios in Singapore, Malaysia and Indonesia were some of the lowest in the Asia-Pacific in 2016, according to a new global report.

Tax revenues made up just 11.6 per cent of the Indonesian GDP, the lowest among the 16 Asia-Pacific economies surveyed - a slight decline from the 12 per cent in 2015.

Singapore came in third, at 13.5 per cent - compared with 13.3 per cent in 2015 - while Malaysia had a tax-to-GDP ratio of 14.3 per cent, down from 14.8 per cent previously.

Two other Asean member states were surveyed: the Philippines, where taxes made up 18.1 per cent of the GDP in 2016, up from 17 per cent the year before; and Thailand, where they contributed 18.2 per cent, against 18.9 per cent before.

"Scope exists in Asian and Pacific economies to broaden tax bases in order to mobilise higher levels of domestic revenues and to reduce vulnerability to external shocks," said the Organisation for Economic Co-operation and Development (OECD), which backed the report, in a media statement.

Across the board, the region's tax-to-GDP ratio fell under the OECD average of 34 per cent. New Zealand had the highest tax-to-GDP ratio in the Asia-Pacific (31.6 per cent), followed by Japan (30.6 per cent) and the Cook Islands (30 per cent).

The taxmen in Asia-Pacific economies rely mainly on goods and services taxes and income taxes, the report noted.

But the report added that contributions from corporate income tax (CIT) were also "high by international standards".

On average, CIT makes up just 9 per cent of tax revenue among OECD members - but the proportion in the region ranged from 9.4 per cent in Samoa to 41.1 per cent in Malaysia.

According to the report, a key factor behind high CIT contribution in Malaysia is the country's reliance on revenues from natural resource companies in the oil and mining sector.

The study was jointly done by two OECD units, with co-operation from the Asian Development Bank, the Pacific Island Tax Administrators Association and the South Pacific Community, as well as the support of the European Union.