The impact of population ageing on tax revenues in OECD countries

Population ageing is a major structural trend across OECD countries, with potentially significant implications for public finances, yet its effects on tax revenues remain relatively understudied. This working paper examines the potential effects of demographic change on tax systems by analysing the distribution of tax bases across age groups and assessing the impact of ageing. It also explores how tax design may further exacerbate revenue pressures. The paper then analyses the implications of population ageing for labour income tax revenues as the working-age population evolves and considers how the relative importance of other tax bases such as consumption, capital income, and wealth-related taxes, may change depending on policy design. It also presents simulations of tax-to-GDP ratios from 1950 to 2060 that isolate the mechanical effects of demographic change under a no-policy-change scenario. These simulations illustrate how population ageing may influence tax revenues across OECD countries over time, as well as countries’ different exposures. The paper also highlights how tax system vulnerability to ageing is shaped by both demographic trends and tax design. Finally, it discusses potential policy considerations and areas of further work.