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US Tax Burden More Than a Third Lower Than G7 Average

US Tax Burden More Than a Third Lower Than G7 Average

  • US government’s rate of tax take more on a par with BRICs emerging economies
  • Other Western economies could be inhibiting growth with higher relative tax takes 

The US has a tax burden of 22 percent of gross domestic product (GDP), a third (30 percent) lower than the G7 average (of 31.1 percent) shows research by UHY, the international accounting and consultancy network.

The US government’s tax take is also over a fifth lower than the average global rate (28.2 percent), and is 50 percent lower than the average in Europe (43.3 percent) in the study. 

The US percentage could fall further in the coming years as some commentators claim that President Donald Trump’s recent tax plan could see US government tax revenues fall by as much as $2 trillion.

The US was ranked joint 23rd in the study. UHY studied 34 countries around the world, calculating what percentage of that country’s GDP is taken by the government in tax (see chart below).

Generally, European economies dominated the top of UHY’s table of the highest taxes. European countries, on average, have a tax burden of 43.3 percent: over 50 percent higher than the global average (26.6 percent) in the study.

Denmark came top of the study with the government’s tax take representing 53.5 percent of total GDP.

Emerging economies in general have seen much lower levels of government tax ‘take’, including many in the ASEAN (Association of Southeast Asian Nations) trading bloc such as Malaysia (16.5 percent) and the Philippines (13.9 percent).

Rick David of UHY member firm UHY Advisors in the US, comments: “Lower personal and business taxes can help the US economy spur growth and create incentives, particularly for investors and larger, more globally-focused businesses.”

“The President’s recent tax cuts – of up to $1.3 trillion – are designed to help sharpen competitive advantage. Today, the US tax position is looking compelling for many businesses compared to the rest of the G7.”

“The US government wants to create an environment for businesses to grow and reducing the tax burden will help create a solid foundation for that. These latest cuts could come as a bit of a wakeup call to other developed economies for them to consider more ways to attract businesses.”

“Developed economies need to investigate ways of lowering the tax burden for businesses or they may find increasing competition for foreign-based companies from more dynamic developed or emerging countries.”

“It’s not easy for more developed economies to balance an aging population with trying to reduce the tax rate.”

Levels of tax take by national governments are of growing interest, particularly for the EU at the moment with Brexit on the horizon, to secure government funding in the short term and encourage growth in the long-term.


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