Despite brimming coffers there are calls for tax increases, or tax cuts to be scrapped. There is no case for that.
Taxation statistics compiled by the Australian Bureau of Statistics released last week were overshadowed by the Consumer Price Index release on the same day.
It is of interest, however, that federal tax revenue reached 23.9 per cent of GDP, which was the cap imposed by the previous government on tax receipts and abandoned by the current government.
The argument so often heard is that if only taxes could be lifted by a few tens of billions of dollars a year over time, revenue would grow faster than expenditure and neatly close the gap between them, leading to balanced budgets or surpluses. There are two problems with this story. One is that it depends entirely on the many high-taxing countries of Europe. Most North American and Asian countries have tax burdens below or similar to Australia’s while Europe’s – with the exceptions of Switzerland and Ireland – are much higher.
Social contributions are mainly employee and employer contributions to state pension schemes. They are legitimately classed as a tax, but the Australian equivalent – compulsory superannuation contributions – are not a tax because they constitute private funding of private retirement benefits. They do, however, have tax-like characteristics insofar as they are a compulsory deduction from take-home pay.
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