I wrote a rather favorable column a few days ago about a new study from economists at the Organization for Economic Cooperation and Development. Their research showed how larger levels of government spending are associated with weaker economic performance, and the results were worth sharing even though the study’s methodology almost certainly led to numbers that understated the case against big government.
Regardless, saying anything positive about research from the OECD was an unusual experience since I’m normally writing critical articles about the statist agenda of the international bureaucracy’s political appointees.
That being said, I feel on more familiar ground today since I’m going to write something negative about the antics of the Paris-based bureaucracy.
The OECD just published Revenue Statistics in Asian Countries, which covers Indonesia, Singapore, Malaysia, South Korea, Japan, and the Philippines for the 1990-2014 period. Much of the data is useful and interesting, but some of the analysis is utterly bizarre and preposterous, starting with the completely unsubstantiated assertion that there’s a need for more tax revenue in the region.
…the need to mobilise government revenue in developing countries to fund public goods and services is increasing. …In the Philippines and Indonesia, the governments are endeavoring to strengthen their tax revenues and have established tax-to-GDP targets. The Philippines aims to increase their tax-to-GDP ratio to 17% (excluding Social Security contributions) by 2016…and Indonesia aims to reach the same level by 2019.
Needless to say, there’s not even an iota of evidence in the report to justify the assertion that there’s a need for more tax revenue. Not a shred of data to suggest that higher taxes would lead to more economic development or more public goods. The OECD simply makes a claim and offers no backup or support.
But here’s the most amazing part. The OECD report argues that a nation isn’t developed unless taxes consume at least 25 percent of GDP.
These targets will contribute to increasing financial capacity toward the minimum tax-to-GDP ratio of 25% deemed essential to become a developed country.
This is a jaw-dropping assertion in part because most of the world’s rich nations became prosperous back in the 1800s and early 1900s when government spending consumed only about 10 percent of economic output.