With the Budget only 20 days away, The Daily Telegraph tells us that Australians paid $839 billion in taxes across all levels of government for the latest financial year. That’s a 4.7% rise, which is more than inflation. So that means the real level of taxes went up, which means the real level of tax take from us has also gone up.
At times like these, my favourite views on taxes from famous people come flooding back.
I love these:
- Terry Pratchett: “Taxation is just a sophisticated way of demanding money with menaces.”
- Winston Churchill: “We contend that for a nation to try to tax itself to prosperity is like a man standing in a bucket and trying to lift himself by the handle.”
- Kerry Packer and my favourite: ‘I am not evading tax in any way, shape or form. Now of course I am minimising my tax and if anybody in this country doesn’t minimise their tax, they want their heads read because as a government I can tell you you’re not spending it that well that we should be donating extra.’
For the ‘numbers’ type, here’s a summary of what we’re taxed:
| # | Category | Detail |
|---|---|---|
| 1 | Total tax paid last financial year | $839 billion — a $37.4 billion increase. About 82% goes to the federal government. |
| 2 | Total income tax (federal) | Up $7 billion to $347 billion. |
| 3 | Company taxes | Rose by 8.2%. |
| 4 | Council rates | Up an additional 6.3%. |
| 5 | Land taxes | Rose 10.1% — property investors are already being slugged ahead of the Budget. |
| 6 | Most taxed state | Victorians pay $6,605 per person — $222 more than NSW taxpayers. |
OK, no-one’s surprised to see that we’re heavily taxed compared to our historical story, with the Albanese Government’s ‘take’ the highest in 30 years. However, on an international basis, we look under-taxed!
Expressed as approximately 30% of GDP means we’re below the OECD average of roughly 34%. We’re in the lower third on the tax table but we look over-taxed compared to the USA and Mexico. But should we compare ourselves to places where medical and social welfare coverage is the substance of Hollywood horror movies?
Here’s a quick snapshot of other countries and the tax they pay as a percentage of GDP:
| Country | Tax as % of GDP |
|---|---|
| Australia | 30% |
| USA | 28% |
| Mexico | 17% |
| France | 45% |
| Denmark | 46% |
We feel the tax burden because we have a small GST. That means income taxes are high, but unlike a lot of European countries we don’t have an inheritance tax or a broad-based wealth tax.
Spending-wise, we’re at 27–28% of GDP, which is lower than the OECD average of 40–42%. But our spending is high on a local historical basis. This has been driven by numerous factors: the aftermath of Covid; the explosion of the public service; the growth of the NDIS program and the tax cuts to offset the impact of high inflation; elevated interest rates; the overall rising cost of living; and the Albanese Government’s desires to remain politically popular.
Here’s one final point that the OECD analysis makes about our super system that effectively takes 12% of a worker’s income.
The Paris-based think tank points out: “Australia’s compulsory superannuation system (employer-funded retirement savings) privatises a large chunk of what European governments fund through public pensions — this alone takes significant spending off the government’s books.”
While you might argue that the 12% take is akin to a ‘tax’ over someone’s working life that’s eventually returned with interest, it means the worker will have less chance of getting a pension when they retire.
This means the super system looks very much like a win-win situation for federal governments and a “kinder loss and kinder win” for the Australian taxpayer. What’s that old line? Oh yeah, “I’m from the government and I’m here to help!”
