The University of Sydney-    Classic Texts in Australian and International Taxation Law

II. International Perspective

2.6. In almost any field of human endeavour international comparisons are difficult to make and liable to be misleading. The area of taxation is no exception. Fortunately, however, international organisations nowadays have large and expert staffs making such comparisons and over the last few years the Organisation for Economic Co-operation and Development (OECD) has been assembling an impressive range of tax statistics covering all twenty-four member countries. The statistics for Australia, which joined OECD in 1971, have been recast in a form comparable with that of most of the countries with which it is interesting to make comparison. The latest document, Revenue Statistics of OECD Member Countries 1965–71, provides a rich hoard of information some of which is summarised in Table 2.E for the earliest and latest years available. The figures are necessarily a little out of date.

2.7. It will be seen that Australia is lightly taxed by international standards, 26.6 per cent of gross national product being taken in tax in 1971 compared with the OECD average of 31.8 per cent. The picture changes somewhat if social security contributions are excluded from the comparison, as Australia is the only country represented in Table 2.E without a separate social security contribution. But, being compulsory levies and a substitute for higher taxation, such contributions should probably not be excluded, unless that fraction of Australian taxation spent on social security is also excluded. However, social security finance is a complex issue on which more will be said in Chapter 13.

2.8. Whether the comparison is made with or without social security contributions, one thing is apparent: the tendency for taxes to rise as a fraction of gross national product, noted already in relation to Australia, is a world-wide phenomenon. In all the countries shown in the table that might be described as modern welfare states,


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taxes (including social security contributions) now account for a third or more of gross national product.

2.9. Table 2.E illustrates the considerable diversity of tax patterns. It is particularly noticeable that, by international reckoning, Australian income tax (especially on companies) is a heavy impost. So too are the miscellaneous levies grouped under ‘other taxes’, a fact to be explained not by any peculiarity of the Australian Government's own tax system but by the very large measure of reliance by State and local governments on stamp duties, property taxes and (in more recent years) payroll tax. By contrast, taxes on goods and services feature less prominently than they do in many countries and, as mentioned already, social security contributions fail to feature at all. In one major respect—the shift towards personal income tax—Australian experience since 1965 parallels the trend of events overseas. On the other hand, the share of company tax has not been diminishing in this country in the way that it has been elsewhere.

TABLE 2.E: INTERNATIONAL TAX COMPARISONS: OECD COUNTRIES, 1965 AND 1971

                                           

	Percentage of total taxes
	Taxes on goods and services	Income tax: persons	Income tax: companies	Social security contributions	Other taxes (a)	Total taxes as percentage of gross national product
1965—
Australia	34.3	33.9	15.6		16.2	23.9
Average of 22 OECD countries(b)	36.7	24.7	8.5	20.4	9.7	27.7
1971—
Selected OECD
courntries—
Australia	31.6	36.9	16.6		14.9	26.6
Canada	33.0	33.9	10.2	8.2	14.7	32.3
France	35.5	10.1	5.8	41.9	6.7	35.6
Germany	29.7	26.9	4.5	33.8	5.1	34.5
Italy	36.9	11.7	6.9	37.9	6.6	30.9
Japan	22.3	24.0	18.8	20.0	14.9	20.1
Netherlands	26.7	27.2	7.0	35.6	3.5	42.2
Sweden	31.7	43.1	3.6	18.0	3.6	41.8
United Kingdom	28.9	33.2	7.8	14.1	16.0	35.7
United States	20.2	33.7	10.4	20.7	15.0	27.8
Average of 22 OECD
countries(b)	33.9	26.9	7.3	22.7	9.1	31.8
Australia's ranking	15th	4th	2nd	22nd	5th	16th
note note

2.10. Even these very summary figures show the Australian tax system to be somewhat untypical. It is revealed as still more so when one looks behind these broad categories to the exact kinds of taxes they contain. What Table 2.E does not reveal, for example, is that in many countries a broad-based value-added tax is the major domestic levy on goods and services, whereas Australia mainly relies on excise duties and wholesale sales tax which weigh heavily upon only a restricted range of goods and services. Again, unlike Australia, at least nine OECD countries impose an annual wealth tax, and the United Kingdom and Ireland are proposing to do so; on the other


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hand Australia has never levied a wealth tax. Also Australia is somewhat unusual in employing the ‘separate’ or ‘classical’ system of taxing companies and, until now, in not imposing capital gains tax.

2.11. Another feature of overseas experience, naturally not reflected in simple statistical tables, deserves special mention. Tax systems in many overseas countries have been drastically changing in recent years and are still under active debate. In the United States, for example, earned income has been given relief in the form of a reduction in top marginal rates of tax. In Canada, capital gains tax has been introduced, significant changes in company tax have been made and personal income tax rates are now being indexed for inflation. In the United Kingdom, much too has recently happened or is being contemplated in the fields of capital gains and development gains taxes, company tax, taxation of goods and services, taxation of capital transfers, and wealth tax. Among recent developments elsewhere are Sweden's partial abandonment of the family as the taxpaying unit under income tax, a change in the form of company tax in West Germany, New Zealand's property speculation tax, and proposed new capital taxes for Ireland. Thus the tax reformer in Australia does not need to feel deprived of possibilities to explore.