Australia's Future Tax System

Architecture of Australia's tax and transfer system

5.3 Australia's tax mix compared with other OECD countries

The Australian tax mix is broadly comparable with most OECD countries. Like most of these countries, Australia raises the majority of its tax revenue (64 per cent) from direct taxes on incomes. The OECD average is 62 per cent (Chart 5.4). The remaining 36 per cent of Australia's tax revenue is raised through indirect taxes including GST, excise and customs duties, and property taxes.

Chart 5.4: Direct and indirect taxes as a proportion of total tax revenue

OECD 2005

Chart 5.4: Direct and indirect taxes as a proportion of total tax revenue OECD 2005

Source: OECD (2007a).

While the share of direct and indirect taxes in Australia is broadly comparable with the OECD average, there are some distinguishing features in terms of its composition. Australia is one of two OECD countries that do not raise tax revenue from social security contributions (Chart 5.5). The contribution of corporate income tax is higher for Australia than for most OECD countries.

Chart 5.5: Components of direct taxation — OECD 2005

Chart 5.5: Components of direct taxation — OECD 2005

  1. Disaggregated income tax data for Mexico not available.

Source: OECD (2007a).

As with direct taxes, there are differences between the components of consumption tax in Australia and in other OECD countries. The most significant is the contribution to total tax revenue from general consumption taxes, which include value added taxes like the GST. In Australia, general consumption taxes (mainly the GST) contribute 13 per cent of tax revenue compared with an OECD average of 19 per cent (Chart 5.6).

Chart 5.6: Components of consumption taxation — OECD 2005

Chart 5.6: Components of consumption taxation — OECD 2005

  1. Includes value added taxes.
  2. Includes excises.

Source: OECD (2007a).

Property taxes contribute just under 9 per cent of total Australian tax revenue compared with an OECD average of just under 6 per cent (Chart 5.7). Australia's property taxes come from two main sources. Taxes on immovable property contribute around 4.5 per cent to total tax revenue compared with an OECD average of around 3 per cent. Taxes on financial and capital transactions, which include conveyancing stamp duties, contribute around 4 per cent of tax revenue, compared with an OECD average of around 2 per cent.

Australia is one of 17 OECD countries that does not levy wealth taxes. This is an important source of revenue for only two countries — Switzerland (4.5 per cent of total tax revenue) and Luxembourg (6.2 per cent of total tax revenue). Australia is one of four OECD countries that does not levy estate, inheritance or gift taxes. However, in those countries that do, these taxes make a negligible contribution to total tax revenue, with an average across the OECD of around half of one per cent.

Chart 5.7: Components of property tax — OECD 2005

Chart 5.7: Components of property tax — OECD 2005

Source: OECD (2007a).