A new report from the Australian Council of Social Service (Acoss) challenges common myths about the nation's tax system, urging participants in the government's economic reform roundtable to acknowledge that Australia is a low-taxing country. The report, titled 'Taxing income less and consumption more: The case against', provides fact-checked data that should underpin any discussion on tax reform.
According to the report, Australia is the ninth-lowest taxing nation among advanced economies, raising less tax than every G7 country except the United States. In 2022, Australia's tax revenue was 29.4% of GDP, well below the OECD average of 34%. The report argues that those who cannot accept this fact should not be part of the reform conversation.
The myth that Australia relies heavily on personal income tax is also debunked. Australia is the seventh-lowest taxer of personal income in the OECD, with personal income and social security taxes accounting for 40% of total tax revenue, compared to the OECD average of 50%. Calls to reduce income tax dependency, such as those from independent MP Allegra Spender, are thus misguided.
Proposals to increase the GST to 15% and cut income taxes are also examined. The report notes that Treasury research found such a shift would deliver negligible GDP gains. Moreover, it would leave the bottom 60% of households worse off, even with compensation measures that are often temporary, as seen with past GST support packages.
Instead of reducing income tax, the report suggests addressing overly generous tax breaks, such as concessions for superannuation, capital gains, and negative gearing, which benefit the wealthy and distort investment. The report concludes that Australia's tax system does not need a fundamental shift away from income tax, but rather a fairer distribution of the tax burden.
