Ask somebody if they believe we’re being taxed enough as a nation and they’ll most likely answer that not only are we adequately taxed, we’re probably overtaxed. But is that actually the case?
Taxes are a hot button political issue at the best of times and even more so now that we’re within 12 months of the next federal election.
Any mention of increases to taxes of any kind – or heaven forbid a new tax – brings cries of unfairness from the individuals or businesses affected and gives a free kick to the opposition party and media.
If one side of politics announces a tax cut, there’s an immediate bump in the polls. Listening to the headlines, you’d think Australians were some of the most highly taxed people in the world, struggling under the weight of red tape.
But new research from the Australia Institute shows the reality is very different – and all Australians are paying the price.
Australia is one of the lowest-taxing countries in the developed world
The research found that in terms of total tax revenue as a percentage of gross domestic product (GDP), Australia ranked position 30 out of the 38 Organisation for Economic Cooperation and Development (OECD) countries.
The only countries that bring in lower tax revenues are tax haven countries like Switzerland and Ireland and lower-income countries such as Mexico and Costa Rica.
Similar economies such as France, UK, Germany, Japan and New Zealand all collect more tax from their citizens and businesses that Australia does.
The result, the report says, is much less money to spend on social services, which can be seen in our extremely low Age Pension and Jobseeker rates.
Because of its low revenue, Australia spends less on social services than most OECD countries,” the report says.
“It [Australia] spends less on aged pensions than all but five OECD countries.
“Its unemployment benefits are the lowest in the OECD relative to the average wage in each country. As a result, despite Australia being one of the richest nations in the OECD – in 2023, it had the eighth highest income per person – its level of poverty is above the OECD average.”
With more people here living in poverty, it’s perhaps no surprise the research also showed we’re not as happy as some of our peers as a nation, ranking 11th on the happiness scale.
All ten countries that rated happier than Australia all have higher levels of tax, which the Australia Institute links to higher levels of social spending.
“Countries that score higher than Australia on wellbeing metrics also raise more tax than Australia does,” says the report.
“This allows them to spend more money on social services, which increases the wellbeing of their population. If Australia is to improve the wellbeing of its population, increasing public revenue and increasing social spending is the easiest way to do so.”
What are they suggesting?
Controversially, the Institute wants to remove capital gains tax (CGT) discounts and negative gearing, estimating CGT alone will cost the government $15.5 billion in lost revenue in 2024–5.5.
They’re also calling for a reduction in superannuation tax breaks, which they say overwhelmingly benefit the wealthiest and cost over $50 billion each year in foregone revenue.
For businesses, they’re looking to increase charges for the fossil gas industry eliminate fossil fuel subsidies, which cost $14.5 billion in 2023–24. The Institute says more than half of Australia’s gas exports pay no royalties and wants Petroleum Resource Rent Tax reinstated.
But while the need for a larger tax base might be evident, selling the idea of more taxes to the public in an election year is a big ask – and what the Australia Institute is asking for is big.
Do you think Australians pay enough tax? Would you support any of these changes? Let us know in the comments section below.
Also read: What you need to know about your taxes in retirement
It’s not how much tax as much as how it is spent. Subsidies of all kinds are unproductive along with give-aways to various off-shore causes. Our maze of regulations and the bureaucracies which police them are diabolical and stifle the economy. A good example is that no new ocean pools have been built in the last 50 years in NSW and a new one, for which funds are available, has been stalled in planning and consultation for more than 5 years with many government and other bodies involved in the approval process calling for more and more studies. 70 years ago, the council would have said yes, a fundraiser would have got the funds to buy the concrete and a working bee would have had it constructed in a week or so. We need to declutter our systems. There are major risks and astronomical costs in risk avoidance.
Well said Gaz, It’s not how much tax is collected, but how it is spent!
The Victorian Claytons Commonweath Games is one example of $589M waste of taxpayer money that comes to mind.
I also wonder if all taxes are included such as, federal, state and GST in the figures stated in this article.
Hi Bill – after a bit of digging, I found the OECD report which is cited by the Australia Institute report which can be found here: https://www.oecd-ilibrary.org/docserver/9d0453d5-en.pdf?expires=1728262953&id=id&accname=guest&checksum=F453B277CF31B2EC2BC62B7F21058302
Page 337 contains a list of taxes included in their definition which includes but not limited to income taxes (corporate and individual); payroll taxes; property taxes (e.g. land tax, stamp duty, council rates); capital gains; superannuation taxes; consumption taxes (e.g. GST) etc. The summary of countries tax to GDP ratio is shown on pages 15 – 19 of the report.
At least we “ONLY” have 2 levels of Government unlike the EU.
On inefficiencies, we have had a fairly minor landslide affecting a major road in the area a few weeks ago. Council or main roads (not sure which) had put up barriers and temporary traffic lights BUT still pay a couple of “stop – go” contractors to sit in their trucks and watch the traffic lights … AND no action at all to fix the slide … probably doing a 1 year study on cause and methods of repair which a couple of men with a truck and an earthmover could have fixed in a couple of days. YES, it might fail again in a few years, but which is more efficient and cost effective?
Gaz we have a similar situation here on the other side of the Blue Mountains in NSW. A bypass road from the Great Western Highway into Lithgow was damaged during the big wet years and was closed for a few years. Part of the landslip has been repaired and stop/go lights, yes with the sitters there watching them, but when there was a prediction of heavy rainfall last week (that did not eventuate) the Council closed the road again.
Now the Council elections have been held and there is quite a change of Councillors heavens knows when it will be open again. In the meantime we have difficulty getting onto the Great Western Highway during holiday weekends (this current one) and next week the Bathurst Car Races are on so we will be stuck at home again!
I don’t mind paying tax but do mind the way in which the Government(s) use the tax receipts!
Is our mix or Personal, Commercial, Corporate (Local & Multi-National) Taxes and Royalties correct ???, or does it need to be reviewed ???
Are the Subsidies in place still applicable or do they need to be reviewed ???
I know that it would be a brave Government to review and apply the required changes.
Then they could increase “Social Spending” in areas like the Age Pension, Disability Pension, etc, and bring Australia in to line with the rest of the OECD Countries !!
Hey Gas, last time I looked we had three levels of government. Local Government (Council), State Government and Federal Government. Sadly, our local Council is apparently almost broke and no longer fixes potholes unless reported (a couple of times). The doors to the Council Admin Building are signed “No Entry” and all contact must go through a Customer Service Centre i.e cannot deal direct with departments. Might as well not have a Local Government tier as it is ineffective!
Easy fix for the council budget – pull back to roads and drainage, leave planning issues to the state and let the rest be either unmet or met directly by the community
Observe any road-building project to see where our tax dollars go! Machines stand idle for days at a time. Men laze about, doing nothing for hours. People are talking for ages on mobile phones. Works are done then ripped up because they were done incorrectly. Go watch a road-building project in Japan or China. They get the job done in 1/50th of the time it takes in good old Oz.
We met a man in the US who runs a private company that contracts to build roads. He told us how he goes about it, the average cost per mile and the average number of miles built in a day. The government should bring him out here to show how it’s done. He could slash costs by billions – except that our prescribed working hours, public holidays, sick leave, flexi-time, etc. mean minimal available hours to actually work, and our pay rates for some government jobs are just ridiculous. Check out the pay rates for someone holding a Stop/Go sign! Then there are the nonsense over-the-top safety precautions that impose huge costs. A project near us kept us stopped at red lights for ages on a hardly-used rural road where neither men nor machines were sighted either working or parked for weeks on end! How much was wasted keeping lights operating in that location?
You realize that government employees don’t build roads anymore and most of the observations you are making are of independent contractors.
I think the majority of people do pay enough tax. But a minority of people at the top of the income stream don’t and that includes most multinational companies operating here.
The very wealthy and the big corporations pay very low rates of tax, some none at all, relative to their huge incomes.
Our tax system is full of ways for those at the top to avoid paying the rates of tax that the rest of us do meaning the tax burden falls mostly on middle income earners.
Neither major political party is willing to reform our taxation system to restore equality and fairness.
The higher end of town is not taxed enough, as they use loopholes O/S to avoid paying tax in Australia, and this must be stopped. Why should ordinary Aussies be taxed more to cover those avoiding paying tax? All income earned by ALL those in Australia should be paying their fair share of taxes regardless of who they are.