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Tax Glossary
The tax ratio is the comparison between a country's tax revenue and the size of its economy, measured by Gross Domestic Product (GDP), over a given period. Expressed as a percentage, it shows how large a share of economic activity is successfully collected as tax revenue. The higher the ratio, the more effectively the state collects tax from the flow of the economy. Governments use the tax ratio as a performance indicator for taxation and as a basis for setting revenue targets in fiscal policy documents such as the Macroeconomic Framework and Fiscal Policy Principles (KEM-PPKF). The ratio is also frequently compared across countries to assess the room for improving tax collection.