The latest edition of Economic Roundup (Issue 2, 2013) released by the Treasury features an article which analyses the structural and cyclical factors affecting past and expected future Australian Government tax receipts. According to the article, entitled Tax-to-GDP: Past and prospective developments, as a share of the economy, taxes are “expected to remain well below the level of the mid-2000s”.
In relation to personal income taxes, the article noted that between 2003-04 and 2010-11, a succession of personal income tax rate cuts reduced the average rate of personal income taxation. The average rate fell from 24.3% of taxable income in 2003-04 to 21.2% of taxable income in 2010-11. According to the article, the average rate is expected to increase as bracket creep driven by wage inflation moves individuals to higher average tax rates. It suggested the average tax rate is expected to approach 2003-04 levels around 2016-17.
In relation to company taxes, the article said that as the GFC hit, corporate tax liabilities fell rapidly as a share of GDP. Company tax (excluding CGT) fell from 4.7% of GDP in 2007-08 to 3.8% of GDP in 2009-10, a fall of around 20%. Following the GFC, company tax (excluding CGT) recovered strongly in 2011-12 to be around 4.4% of GDP. However, despite the growth, the article noted that company tax (excluding CGT) receipts in 2012-13 as a share of GDP remained 9% below 2007-08 levels. It added that company tax (excluding CGT) is forecast to be around 4.1% of GDP in 2016-17.
Other articles in the Roundup include: Tax Policy Formulation in Australia; Income inequality in Australia; and Slowing productivity growth – a developed economy comparison.
[LTN 238, 9/12/13]