Overview

Australian Government receipts have averaged around 24.1 per cent of Gross domestic product (GDP) over the past 30 years, with fluctuations in individual years. Economic growth has been the main driver of receipts. Despite significant tax reform over the period, the net impact of policy decisions changing taxation rates and coverage had a much less significant impact on total receipts.

The mix of direct and indirect taxes collected by the federal government has remained relatively unchanged over this period. With direct taxes averaging 73.1 per cent of total receipts, Australia continues to rely more heavily on direct taxes than most other OECD countries, despite the introduction of the Goods and Services Tax (GST). The federal government continues to collect the bulk of tax receipts in Australia, with little change in the share of taxes collected by state, territory and local governments.

There have, however, been changes in the relative importance of certain tax categories, reflecting major tax reforms, changes to tax law and profound changes in the structure of the Australian economy. Receipts from taxes on capital and consumption have increased, while receipts from taxes on labour and other taxes and charges have declined.

Taxes on capital have grown modestly from 4.4 per cent of GDP in 1982–83 to 4.6 per cent of GDP in 2012–13, reflecting offsetting trends. Company tax receipts almost doubled as a proportion of total receipts, reflecting an increase in corporate profits as a share of GDP. However, this increase was mostly offset by a large fall in resource rent taxes over the period, reflecting a sharp decline in the contribution of offshore oil production to economic activity. The introduction of capital gains tax has increased the volatility of taxes on capital, with receipts moving in line with medium term trends in asset prices, particularly in share prices.

Taxes on consumption as a share of GDP increased substantially from 4.7 per cent in 1982–83 to peak at 7.1 per cent in 2002–03, reflecting a series of policy measures, including: the introduction of the GST; a series of increases in fuel tax excise in the 1980s; and increases in alcohol and tobacco excise associated with the introduction of the GST. However, over the past decade taxes on consumption have steadily declined to 5.4 per cent of GDP in 2012–13, reflecting a combination of policy (including tariff cuts and non-indexation of fuel tax excise) and economic developments (such as the shift in consumption patterns away from taxed items and the increase in the household saving ratio).

While still the largest source of receipts, taxes on labour have fallen from 12.2 per cent of GDP in 1982–83 to 10.9 per cent of GDP in 2012–13. This reflects a decline in personal income tax that has more than offset the impact of the introduction of new taxes on fringe benefits and superannuation contributions. The reduction in personal income tax reflects, in equal measure, a reduction in the wage share (the proportion of GDP received by labour) and the impact of tax cuts in excess of ‘bracket creep’ on the average personal income tax rate.

Other taxes and charges include sale of goods and services, interest and dividend receipts, and a range of other tax and non-tax receipts. They declined from 2.6 per cent of GDP in 1982–83 to 2.0 per cent of GDP in 2012–13. The main driver of this decline was that interest receipts fell by over 1 per cent of GDP, as the federal government ceased borrowing on behalf of the state and territory governments.

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