Trends in Tax Revenues

April 11, 2012 | Tom Salemy, CFA, CAIA, Managing Director

This week’s chart shows trends in tax revenues, indexed to 2007, for a group of ten selected countries (based on rolling twelve month averages for each). Taxes are the main source of government revenues and a crucial factor for the fiscal stability and economic growth of countries. Tax revenues are appropriated for public works, interest payments, financial assistance, education, infrastructure, growth incentives, and counter cyclical measures.

As the chart illustrates, there has been a divergence of tax revenues between developed and emerging market countries. Since 2007, most emerging market governments’ tax revenues have increased while the majority of developed countries’ tax revenues have either decreased or slightly increased.1 Many developed countries across the world continue to face revenue headwinds as they de-lever and recover from the 2008 financial crisis and subsequent economic slow-down, all of which have lowered tax revenues.

Going forward, this chart suggests a much more favorable backdrop for emerging market countries compared to developed countries. An increasing trend in tax revenues should allow emerging market countries to allocate money to public services as well as investment in infrastructure, education, research and development, and other important factors that contribute to countries’ long-term success and prosperity. Developed countries are struggling to maintain public services and programs with limited revenues and are being forced to borrow money; the U.S. has over $15 trillion in debt outstanding and is projected to run a deficit of approximately $1.2 trillion in 2012.2 As this occurs, investment in infrastructure, education, and other important growth platforms is placed on hold as more money is allocated towards debt and interest payments.

___________________________________________________________________________________

1 Bank of Korea, Bank of Italy, Federal Reserve, Bank of Thailand, UK Office for National Statistics, Bank of Greece, National Bank of Poland, Bank of Japan, Bank of Spain, Bank of the Republic of Columbia

2 Congressional Budget Office as of 03/31/2012

Tom Salemy, CFA, CAIA
Managing Director

Get to Know Tom

Related Content

Line chart showing the personal savings rate and personal consumption amongst Americans. Chart subtitle: Personal savings rates have retreated from pandemic-induced highs, however several potential headwinds still face the American consumer this holiday season Chart description: Y-axis ranges from -15% to +30%. X-axis shows quarters from 3Q16 to 3Q21. Line for Personal Savings Rate is purple and line for Personal Consumption (Quarter-Over-Quarter Change) is dark green. Both lines were relatively steady up to 2Q20 as the coronavirus pandemic took hold of the economy. The Personal Savings Rate peaked in that quarter to 26.0% and the Consumption Rate Change decreased to the extremein 2Q20 then peaked the following quarter with a 10% increase. Both levels have returned to just slightly higher than normal levels in recent quarters. Chart source: Federal Reserve Bank of St. Louis as of September 30, 2021.

12.02.2021

‘Tis the Season for Consumer Spending?

The COVID-19 pandemic resulted in significant changes to, among a plethora of other things, consumer behavior in the United States….

11.18.2021

Bulls on Parade: What’s Driving the 2021 Digital Asset Rally?

The first bitcoin futures ETF — the ProShares Bitcoin Strategy ETF — was approved on October 15th, making it easier…

Combination chart showing number of regulatory actions by the Chinese government (columns) and MSCI China Index cumulative returns (line) by month. Chart subtitle: In recent months, Chinese equities have been hampered by new regulations from Beijing authorities aimed at a variety of industries . Chart description: Left Y-axis shows Cumulative Return in percent of the MSCI China Index, from -20% to +15%. X-axis shows months from November 2020 to September 2021. Right Y-axis shows Number of Beijing Regulatory Actions from 0 to 35. The x-axis line is at the 0% mark for the Cumulative Return axis. Prior to this summer, the number of regulatory actions was very low, typically less than 5 per month in the data shown. In May 2021, there were 9 actions; June saw 3, then July had 14, August had 31, and September had 24. The MSCI China Index has struggled with this increase and has been negative each month since June. Chart Sources: Bloomberg, Cornerstone, and MFS; data as of September 30, 2021.

11.09.2021

China: Regulators, Mount Up!

Over the last year, the Chinese government has enacted a series of new regulations targeting several domestic industries including finance,…

11.04.2021

The More the Merrier?

A driving force for most investors seeking to add a private equity allocation to their portfolios is the strong performance…

Column chart showing stock indices performance during periods of rising inflation. Chart subtitle: U.S. stock indices have tended to rise during inflationary periods in the last several decades. Chart description: Y-axis shows annualized return, from -10% to 60%. X-axis shows seven periods of rising inflation (Jan 1979 - March 1980; Dec 1986 to Oct 1990; March 1998 to March 2000; June 2002 to July 2008; July 2009 to Sept 2011; Jan 2015 to July 2018; May 2020 to Sept 2021). Each stock index represented by a column: Russell 1000 Growth in blue, Russell 1000 Value in light blue, Russell Mid Cap Growth in purple, Russell Mid Cap Value light purple, Russell 2000 Growth in dark green, and Russell 2000 Value in green, CPI in dark gray. Almost all show positive returns. Chart source: Bloomberg; data as of September 30, 2021.

10.29.2021

Can Equities Provide a Hedge Against Inflation?

Inflation has been at the forefront of the minds of many investors in recent months as higher price levels have…

10.26.2021

The Holiday Party Guest List

Though the leaves have only started to change color, holiday party planning is in full swing. And while ample food…

More articles

Subscribe to Research Email Alerts

Research Email Alert Subscription

Research alerts keep you updated on our latest research publications. Simply enter your contact information, choose the research alerts you would like to receive and click Subscribe. Alerts will be sent as research is published.

We respect your privacy. We will never share or sell your information.

Thank You

We appreciate your interest in Marquette Associates.

If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.

Contact Us >