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
