Our tax burden is low, except for companies
Australia is more dependent on highly volatile company tax revenue than almost any other advanced nation, while making much less use of more stable taxes on consumption.
The OECD’s annual review of government finances shows Australia is one of the lowesttaxing nations overall, but it hits its business sector much harder, raising the equivalent of 4.6 per cent of GDP in company taxes, which is almost double the OECD average of 2.9 per cent.
Companies provide 16.5 per cent of government tax revenue in Australia. The only OECD members with a greater dependence on company taxes are Mexico and Chile, which both have poor personal income tax collections. The average advanced nation gets only 9 per cent of its revenue from company taxes, with most major European nations raising 5 per cent of their revenue from business.
Australia’s overall tax burden is one of the lowest of advanced countries, with total government tax revenue amounting to 27.8 per cent of GDP, compared with an advanced-country average of 34 per cent. Australia’s tax burden is the seventh-lowest, with the US, Korea and Ireland being the only major advanced nations raising less.
Australia’s reliance on company tax revenue reflects its high standard rate of 30 per cent, which is much higher than the advanced-nation average of 23.9 per cent, and has not been changed for 18 years.
Labor and the Greens blocked efforts by the Coalition government to lower Australia’s standard company tax to 25 per cent by 2026-27, which would still have been above the OECD average. Tax cuts were agreed only for small business.
The high dependence on company taxes is also a result of the profitability of the resources and finance sectors, which between them provide about half of all company tax revenue.
The OECD report shows it is the volatility of company taxes that is primarily responsible for Australia’s decade of deficits.