Value Added Tax in the OECD

There is only one country in the OECD—the United States—that uses retail sales taxes as its principal consumption tax. There is no national sales tax in the US, only state and local sales taxes, and those taxes vary widely, from zero percent to over 10 percent. Instead of sales taxes, the rest of the OECD uses the Value Added Tax (VAT).

First introduced in France in 1954, by 1960 there were fewer than ten countries worldwide that implemented the Value Added Tax (VAT); by 2022, it had become an important source of revenue in 174 countries. The VAT is a common form of consumption tax that is due at every stage of a product's manufacturing from the sale of the raw materials to its final purchase by a consumer. The OECD notes that “the spread of VAT has been among the most important developments in taxation over the last half century.” The VAT is attractive because it is capable of raising enormous amounts of revenue. In the United States, with consumption close to 70 percent of the GDP, even relatively small tax rates could capture a great deal of money.

Source: Consumption Tax Trends 2022: VAT/GST and Excise, OECD, n.d., https://www.oecd-ilibrary.org/sites/6525a942-en/1/3/1/index.html?itemId=/content/publication/6525a942-en&_csp_=9be05a02fe0e4dbe2c458d53fbfba33b&itemIGO=oecd&itemContentType=book#figure-d1e568