I am releasing the Report of the International Comparison of Australia’s Taxes by Messrs Warburton and Hendy today.
The Report concludes that with an overall tax to GDP ratio of 31.6per cent, Australia is a low tax country by comparison with other developed economies. Australia has the eighth lowest tax burden of the 30 OECD countries.
Australia’s mix between direct and indirect taxation is in line with other OECD countries, although the composition differs. For example, Australia’s indirect tax mix differs through a lower reliance on value-added and sales taxes, and a relatively higher reliance on property and transaction taxes largely imposed by the States.
Australia is one of only eight OECD countries that does not levy any wealth, estate, inheritance or gift taxes.
Some of the countries that have a lower tax burden than Australia, notably Japan and the US, run very large fiscal deficits. Only nine countries in the OECD have balanced Budgets.
In 2003, Australia had the third lowest government expenditure as a proportion of GDP of the 28 OECD countries for which data is available (2003 was used as this is the latest year for detailed breakdowns of tax information). By 2005, Australia had moved to the second lowest spending government out of the 28 OECD countries.
The biggest structural difference between Australia’s tax system and those in other countries is our absence of social security contributions.
Australia’s total wage and salary tax take as a proportion of GDP is low compared with the OECD-30 and the OECD-10. Once social security taxes and payroll taxes are accounted for, Australia has the second lowest level of direct taxation on individuals and payroll in the OECD-10.
Australia’s direct taxation of individuals and payroll is 14% of GDP, which is the fourth lowest in the OECD. For the eight family types examined by the report, the tax burden of each type is amongst the lowest eight of the 30 OECD countries.
The report shows that Australia’s top marginal personal tax rate of 48.5% is slightly higher than the OECD average of 46.7%, while the threshold for the top marginal rate is slightly lower than the average for the OECD. The difference between Australia’s top marginal tax rate and company rate is broadly in line with the average difference for the OECD-30. Of the OECD-30, only the Slovak Republic has aligned its top marginal tax rate with the full statutory corporate tax rate.
Australia has the eighth highest reliance on property and transaction taxation in the OECD (mainly capital transaction taxes such as stamp duties on mortgages). These taxes are mainly imposed by State and Territory governments in Australia.
The Report calculates churning (the notion that households can simultaneously be taxpayers and recipients of welfare) and shows that Australia has the lowest level of churning across 10 comparable countries in the OECD.
Australia has the third lowest level of tax on unleaded fuel in the OECD, this level being less than half the OECD average.
The Report finds our childcare costs are relatively low when measured by how much of an extra dollar is kept when returning to work.
The Report will stand as a significant reference point to assist in framing policy to improve taxation policy and heighten the competitiveness of the Australian economy.
I thank Messrs Warburton and Hendy for their work in producing this report.
Copies of the report are available on http://comparativetaxation.treasury.gov.au.