Does a higher level of taxation imply a more prosperous country?

  • Morten Hansen
  • 20.12.2016.
Foto: pixabay.com

Foto: pixabay.com

One of the main economic-political debates of this year has been about (surprise, surprise...) taxes. Partly about a review of the tax system, including the evaluation of the World Bank, partly about the ongoing issue of raising the share of total tax revenue to GDP to 1/3 from its current level of around 29-30%. 

In an EU context Latvia does not tax all that much. Figure 1 shows total government revenue as a share of GDP for the EU countries in 2015. A good chunk of this revenue is e.g. EU funds which are government revenue but should not be seen as tax revenue, of course, and this gives a value for Latvia of 35.8% with just Lithuania, Romania and Ireland having lower shares. And for the latter the number is misleading due to recent recalculations of GDP so Latvia is indeed at the lower end.

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