Tax man whacks Aussie workers more than most OECD countries

Aussie workers are slugged with more income tax than most other advanced countries. See how Australia compares.

Australia relies on income taxes paid by workers more than almost any other advanced economy, according to a new report that will increase the pressure on the Albanese government to guarantee $20bn in tax cuts due next year.

And when combined with corporate income taxes, Australia’s total tax take whacks workers and businesses at a higher rate than all other developed countries.

The Organisation for Economic Cooperation and Development analysis, released on Wednesday night, showed 39 per cent of Australia’s $680bn in tax revenue came from income taxes on individuals.

Treasurer Jim Chalmers. Picture: NCA NewsWire / Martin Ollman

Only Denmark, Iceland, New Zealand and the United States recorded a higher reliance among the OECD’s 38 members.

The report lobs amid a renewed debate over the third stage of the Coalition-era tax cut plan, which comes into force on July 1 next year and means everyone earning between $45,000 and $200,000 will pay the same 30 per cent tax rate.

The tax cuts are due to cost $20bn in the first year and $313bn over a decade, prompting some economists to warn they could exacerbate Australia’s stubborn inflation challenge.

Critics, including in the Labor Party, also argue the benefits will be disproportionately enjoyed by high-income earners rather than those struggling the most with the cost of living.

But the Albanese government went to last year’s election promising to leave the legislated plan in place, and Treasurer Jim Chalmers maintained last week: “We haven’t changed our position on stage three.”

He said the tax cuts had already been factored into inflation forecasts prepared by Treasury and the Reserve Bank. And while he said he understood “that people would like us” to alter the distribution of the relief, Dr Chalmers argued the government had “found better and sooner ways to help people who are doing it toughest”.

The OECD report also showed that Australia’s reliance on consumption taxes was far below comparable economies, aiding recent calls by the OECD as well as the International Monetary Fund to retool Australia’s tax take by increasing or expanding the GST.

In its report on the health of Australia’s economy last month, the IMF also pushed for lower income taxes, saying the government needed to implement “comprehensive tax reforms including rebalancing from high direct taxes to under-utilised indirect taxes”.

The OECD’s latest analysis found 22.5 per cent of Australia’s tax revenue came from corporate income taxes, higher than all other advanced economies except for Colombia and Norway, and more than double the OECD average.

Originally published as Tax man whacks Aussie workers more than most OECD countries