What is the tax ratio to GDP?

The tax ratio to GDP is an economic measurement that compares the amount of taxes collected by the government to the amount of income that the country receives for its products. This income is measured in terms of gross domestic product or GDP, which is the amount of all products and goods sold, personal and government investments and pure exports. By comparing this amount with the amount that is collected in tax revenues, economists can get a gross idea of ​​how many economies of a particular government are supported by its collection. It is important to note that the comparison of the GDP tax ratio in different countries can be misleading because the circumstances in each country are unique and contribute to the overall economic climate. Another main factor that can be overlooked is tax revenues selected by governments. These taxes may be straightforward, like those that are chosen on individuals for income that earn or indirect, such as fees or customs of goods sold. How many of these tax revenues stimulate the economy is whatEconomists hope to find when they study the tax ratio to GDP.

As an example of how the GDP tax ratio is calculated, imagine a hypothetical country that uses a dollar, a US money system. In a certain period of time, this country has a gross domestic product of $ 1,000,000 (USD). During the same time he collected $ 100,000. The ratio in this case would be $ 100,000 distributed $ 1,000,000, which is 0.10 or 10 percent.

The gross domestic product is measured by all income obtained from the products sold in the country, with pure exports included in this amount. Most of the tax revenues come from income collected to individuals and corporations. For this reason, the country of the country at high tax rates tends to have a high tax ratio to GDP.

It is not always useful to look at the tax ratio to the GDP of one country compared to other countries as an indicator of economic post. The economy can affect many other factors, for example how much the country's debt has been incited to incite its economy or how inflation affects expenses. Developed countries will also tend to have higher conditions than developing countries. The best way to use this ratio is the study of how or falls in a country, and compare that the overall economic health of the country in this period.