Australia's Future Tax System

Architecture of Australia's tax and transfer system

5.2 Tax to GDP ratios in other countries including our immediate neighbours

As a percentage of GDP, tax revenue in Australia is significantly higher than most ASEAN countries, as shown in Chart 5.3. While tax revenue in Brunei Darussalam is around the same as that of Australia as a percentage of GDP, 95 per cent of this comes from oil and gas companies. For many of these countries non‑tax revenues, such as land sales and official development assistance, contribute a more significant proportion of overall government revenue. The role of government also tends to be more limited. When considering investment decisions, tax is only one of a range of factors, including: macroeconomic stability; a supportive legal and regulatory framework; skilled labour and labour market flexibility; and well‑developed infrastructure. It is plausible that as these economies grow and the standards of living of our immediate neighbours rise, the role of government and the level of taxation in these countries will expand, as has been the case across most OECD countries over past decades.

The chart also shows a range of other countries, including Brazil, China, India, Russia and South Africa. Brazil, China, India and Russia represent around a quarter of world GDP and are increasingly integrating into the world economy. China and India are important trading partners and competitors for Australia. Brazil and Russia are significant commodity exporters, particularly in agricultural and resource commodities. South Africa is also an important commodity producer and exporter, particularly of minerals.

Relative to Brazil, China and India, Australia's tax to GDP ratio is high. It is more comparable with that of Russia and South Africa. In part, this reflects differences in the role of government expenditure. In Russia and South Africa, social expenditure as a proportion of total government expenditure is more comparable with Australia.

Chart 5.3: Tax and non‑tax revenue as a percentage of GDP

Australia, ASEAN and selected other countries (2005)(a)

Australia, ASEAN and selected other countries (2005)(a)

  1. Unless otherwise indicated, data reflect revenues at all levels of government.
  2. Data for 2004.
  3. Brazilian central government only.

Source: OECD (2007a); International Monetary Fund country reports; national governments; Australian Treasury estimates.