Australia is one of the world's lowest taxing developed economies

Study reveals australia is one of the world's lowest taxing developed economies

Monday 25th June 2012


The study by international accounting and consultancy network, UHY, revealed Australia collects just 23% of GDP in tax, which is lower than all but one G7 nation (Russia) and sixth overall in a list of the 23 economies analysed. Australia's tax collected as a percentage of GDP was also 21% lower than the combined average of the three major Eorozone economies of Germany, France and Italy.

The research looked at tax and GDP data for 23 countries across UHY's international network, including the G8 key emerging economies and the BRIC nations. It did not include the compulsory 9% super guarantee charge Australian businesses are subject to which does not exist in Europe.

UHY Haines Norton Australia Tax Group Chairman, Michael Garrone said while the study's findings that Australia is a relatively low taxing country might surprise many Australians, it also highlights a double edged sword in maximising the benefits of lower taxes.

"While our current tax competitiveness on a global scale has clear advantages for business and the economy, there's a danger that it will be undermined by any policies or new taxes that increase labour costs and diminish productivity," Mr Garrone said.

"Coupled with a current skills shortage many industries are experiencing, we run the risk of throwing the baby out with the bathwater and limiting the relative advantage our economy has.

"Globally, countries like Germany, Italy and France clearly face tougher times however, as their high tax burden is often identified as an important factor inhibiting economic growth.

"Many G8 nations facing the Eurozone crisis over the last few years have attempted to reduce their debt levels by raising taxes.

"But from a tax perspective, this poses a catch 22 situation as they're pricing themselves out of the market by raising taxes to pay down debts while at the same time eroding competitiveness even further," Mr Garrone said.

Australia collected USD 354.1 billion of taxes from GDP of USD 1,507.4 billion in the most recent tax year. Of that total, indirect taxes were USD 118.4 billion and income taxes USD 202.7 billion.  

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