Australian Government CrestInternational Comparison of Taxes

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8. Taxation of goods and services

Summary

Over the past fifty years, OECD countries have generally become more reliant on taxes on general consumption as a proportion of total taxation revenue, but there has been a decline in revenue from taxes on specific goods and services. The key reason for this is the substitution of value added taxes (VATs) for other specific consumption taxes.

Australia’s revenues from both general and specific goods and services taxes (9.4 per cent of GDP) are around the average of the OECD-10 (9.2 per cent) — Australia is fifth lowest in terms of tax burden.

The mix of Australia’s goods and services taxes differs from the average OECD-10 mix, mainly through lesser reliance on value added and sales taxes.

Australia’s revenues from value added and sales taxes are the fourth lowest of the OECD-10 at 4.3 per cent of GDP and are below the unweighted average of OECD-10 (5.5 per cent).

Australia has the equal fourth lowest statutory tax rate on general consumption of the OECD-30 and its 10 per cent goods and services tax (GST) rate is well below the unweighted OECD average of 17.6 per cent.

Of the twenty-nine OECD countries which levy a value added tax (VAT), twenty-seven, including Australia, apply reduced rates and/or zero rates to certain goods and services. Thirteen OECD countries do not apply a zero rate to any domestic goods or services (as at 1 January 2003).

Australia’s reliance on excise and customs duties is 3.4 per cent of GDP. It is the third highest in the OECD-10 and is higher than the average of the OECD-10 countries (2.6 per cent).

Australia’s rates of fuel excise duty are among the lowest in the OECD. As at 1 January 2005, Australia had the fourth lowest tax rate on unleaded petrol of both the OECD-30 and the OECD-10.

For the last quarter of 2005, the average level of tax (both GST and excise duty) included in unleaded petrol prices in Australia was A$0.490 per litre — this was less than half the OECD-30 average (A$1.148 per litre). Australia had the third lowest level of tax included in unleaded petrol prices of both the OECD-30 and the OECD-10.

The diversity across countries in the implementation of excise duties applied to alcohol and tobacco products makes it difficult to determine Australia’s relative ranking compared to other countries for these products.

Disaggregation of recurrent indirect taxes into sub-components is problematic. Significant classification issues exist in the data. Subject to these caveats, Australia has the equal highest tax burden of the OECD-10 countries from motor vehicles tax (0.6 per cent of GDP) — this is well above the average of the OECD-10 countries of 0.3 per cent of GDP.

Based on 2001 data, for both the OECD-30 and the OECD-10, about half of countries do impose specific environmental taxes and half do not.

8.1 Introduction

This chapter provides an overview of goods and services taxes as a proportion of GDP. As in other chapters, the focus is generally on the OECD-10 comparator group, and supplements the information in Chapter 3.

The chapter then examines the base and rates for different parts of the goods and services taxes classification. The primary division is between general taxes (such as a VAT or GST) and specific taxes on goods and services. The chapter draws out differences in the rate and base of general consumption taxes.

Taxes on goods and services cover all taxes and duties levied on the production, extraction, sale, transfer, leasing or transfer of goods, and the provision of services, or taxes and duties levied in respect of the use of goods or permission to use goods or perform activities.

This category covers taxes such as:

  • general sales taxes;
  • value added taxes (such as Australia’s goods and services tax — GST);
  • excise duties;
  • tax levied on the import and export of goods; and
  • taxes levied in respect of the use of goods and taxes on permission to use goods, or perform certain activities.

Specific goods and services taxes are broken into several different classifications. As is the case throughout this report, when the aggregate information is broken down further, classification errors arise. Differences in tax structures in countries can also make international comparisons of the more detailed break-downs problematic. Several specific examples of this are outlined below.

Analysis of specific goods and services taxes is complicated by their broad range and interactions. Comprehensive and comparable information could not be found for all OECD-10 countries. Additionally, as these types of taxes are often levied by sub-national and local governments, there are potentially hundreds or even thousands of combinations. The discipline of international comparisons across a consistent set of countries is a useful approach, and further study would be useful for further international tax analysis
(whether by private bodies or by government).

As most specific goods and services taxes are imposed at a flat, proportionate rate, tools of analysis such as average versus marginal analysis are less relevant to them. There are also few tools equivalent to the effective average and marginal tax rate measures used in the corporate taxation chapter. As a consequence, most of the analysis in this chapter is based around descriptive measurements of variations in rates and tax bases.

 

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