Effectively implemented and appropriately graded taxation allows a country to be better enabled in its efforts to defend national security, sustain a high quality of life amongst its populace, and adequately expand its infrastructure. Despite the importance of such factors, there are some countries which register such low tax collections that they are barely able to sufficiently finance the carrying out of governance and meet the needs of their internal affairs. Most of the countries listed below are in the developing world, as opposed to the general trend for more developed ones to record much higher tax revenues. That leaves us asking an important question: just why is there such disparity in tax revenue between nations that have more developed economies and those that are less developed?
Likely, the most satisfying and rational answer to the question is that most developing countries have relatively low Gross Domestic Products (GDPs). This reflects a lower level of total production and financial revenue within a nation’s borders, and necessitates that the monies available for tax collection will also be more limited. Since such nations’ citizens and businesses cannot manage to pay higher taxes, this is often reflected in the inadequate infrastructures that characterize the developing world. More developed countries, on the other hand, have a much higher GDP, and that is why their revenue collections are much greater, and their capacity to develop infrastructure much higher.
For taxes or revenue to be collected effectively, there must be a strong administration in place to take charge in collecting and managing the tax collection revenues. For many countries, however, strong authorities are simply not in place to do so. Examples of such cases are evident within the least taxed nations. Notable among these are Syria, Nigeria, and South Sudan, which are all in conflict and thusly have unstable government regimes.
Lack of Transparency
When dealing with the collection of taxes, a country needs to be as transparent as possible. This means that it should be clear where tax monies are sourced from so that they may be accounted for. This is not the case in most countries with low tax collection such as South Sudan, where corruption is rampant and revenues cannot be justified by clear pictures of what they are used for. Due to this reason, the unaccounted-for monies may not be reported at all to international bodies, and such taxes may not be recorded in data such as that used in our list. For this reason, some of the countries listed may in fact collected more monies than that recorded, and corruption and lack of transparency has made their finances less easy to verify.
Different Governments, Common Results
Ambiguous financial statements are also common in countries such as Cuba and Burma, in which their leaders are often in constant dispute with other major world leaders, so they choose to release limited data about the country’s tax revenues to international bodies. Also, tax collection may not be as effective within certain nations when there is marked division between opposing political sides that lead to low tax collection because of failures to move collections policies forward through mutual agreement.
Remedying the Problem
Listed above are some of the most significant reasons as to why some countries have lower tax collections than others. Although this list is not thoroughly comprehensive, it does give a good synopsis of the most prevalent factors that lead to low tax revenue collections globally. Having said this, we cannot neglect the fact that these factors should be addressed to rectify inadequate tax collections along with exploring other options.
Countries With The Lowest Tax Revenue In The World
|Rank||Country||Tax Revenue (as percentage of GDP)|
|3||South Sudan||3.10 %|
|6||East Timor||6.00 %|
|10||Korea, North||11.40 %|
|12||Sri Lanka||12.30 %|
|13||Central African Republic||12.30 %|
|15||Saint Lucia||13.20 %|
|16||Costa Rica||14.20 %|
|17||Puerto Rico||14.20 %|
|18||Sierra Leone||14.30 %|
|24||Dominican Republic||15.00 %|
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