Architecture of Australia's tax and transfer system
Australians pay at least 125 different taxes each year. Of these, 99 are levied by the Australian government (including 67 agricultural levies), 25 by the States and 1 (council rates) by local government. The exact number of taxes is difficult to determine and may be higher than these estimates. This reflects ambiguity in distinguishing when a payment to government represents a separate tax or part of a broader tax and whether a payment is a tax rather than a fee for service (see Box 2.2 for further discussion). The estimates above take a conservative approach to these issues and therefore may understate the number of taxes paid by Australians.
Similarly, the estimates treat equivalent taxes levied by different States as one tax rather than up to eight different taxes. From the perspective of individuals or businesses operating across more than one jurisdiction, equivalent taxes levied by different States might be viewed as separate taxes, since they need to be accounted for separately and typically differ in terms of rates, thresholds and exemptions. Viewed from this perspective, there could be as many as 160 different state taxes (excluding local government rates) and 259 taxes nationally (excluding local government rates).
Box 2.2: What is a tax?
The ABS defines taxes as 'compulsory, unrequited transfers to the general government sector' and taxation revenue as 'revenue arising from compulsory levies imposed by government' (ABS 2005). This is consistent with the International Monetary Fund definition, which is based on the United Nations description of taxes as 'compulsory unrequited payments, in cash or in kind, made by institutional units to government units' (United Nations 1993, paragraph 8.43).
It is difficult to determine the precise number of taxes. Statistical agencies are concerned with classifying revenue rather than counting the legal or administrative mechanisms by which it is raised — the individual taxes. While personal income tax, the GST and company tax are clearly separate taxes, there are many cases where a particular type of payment could be regarded as a separate tax or as a subset of a broader tax. For example, capital gains tax (CGT) could be regarded as a separate tax or as a part of the income tax. This paper takes the latter view. Superannuation guarantee payments by an employer (other than the superannuation guarantee charge) are not payments of tax because they directly benefit the employee and are not made to government. The penalty component of the superannuation guarantee charge can be considered a tax but not the amount that is transferred to the employee's account.
A core characteristic of a tax is that there is no clear and direct link between the payment of the tax and the provision of goods and services to the taxpayer. The funds that the government raises from taxes may be used to provide goods or services to the community as a whole, and this may provide a benefit to the taxpayer, but the payment will still be considered a tax if there is no direct relationship between the amount of the payment and the benefit to the taxpayer. Where a government agency recovers the costs of supplying a product or service to an individual, the revenue is classified as non‑tax revenue. Only if the fees charged exceed the agency costs are the payments (or part of the payments) classified as a tax.
The economic definition of a tax used in this paper may differ at the margin from the legal meaning of the term. In the context of the Commonwealth Constitution (s 51(ii)), a tax is 'a compulsory payment raised for government and public purposes which is not a payment for services rendered or a penalty, the exactions of which are not arbitrary and the liability for which is not incontestable' (LexisNexis 2008).
Table 2.1: Australian, state and local government taxes
|Tax type||Revenue 2006‑07 ($million)||Tax base description||Taxpayers and collection points||Number of taxpayers (approx)|
|Australian government taxes|
|Individuals and other withholding taxes||117,614||Taxable income of individuals, including from wages, salaries, allowances, interest, dividends and rents||Remitted by employers or paid by individuals through instalments to the ATO on an annual assessment||11.5 million|
|Company tax||58,538||Taxable income of companies||Paid by companies quarterly to the ATO||730,000|
|Goods and services tax||41,208||Taxable supplies of goods and services and taxable importations of most goods||Paid by registered entities to the ATO. Collected by Customs from importers at the border, or deferred and paid to the ATO||2 million|
|Excise duty||22,734||Fuel products, alcohol and tobacco||Paid by the manufacturer or owner of the goods to the ATO||400|
|Superannuation funds||7,879||Contributions to and earnings of superannuation funds||Paid by superannuation funds to the ATO||285,000|
|Customs duties||5,644||Various imported goods, including textiles, clothing and footwear and motor vehicles||Collected at border by Customs||na|
|Fringe benefits tax||3,754||Taxable benefits provided to employees (or their associates) in respect of their employment||Paid by employers to the ATO||69,000|
|Petroleum resource rent tax||1,594||Profits above a normal rate of return from extracting petroleum||Paid by companies extracting petroleum from most offshore petroleum projects||42|
|Wine equalisation tax||651||Wine and wine products, cider, perry, mead and sake||Paid by producers and/or wholesalers to the ATO||1,900|
|Agricultural levies||608||Various agricultural products||Paid by intermediaries (wholesalers, agents, brokers, processors, exporters etc) and/or agricultural producers to Levies Revenue Service||9,100|
|Luxury car tax||365||Vehicles with a GST‑inclusive value above the luxury car threshold||Paid by suppliers to the ATO||1,100|
|Other taxes||1,922||Comprised primarily of revenue from other regulatory taxes, industry levies and licence fees|
|Total Australian government tax revenue||262,511|
|Payroll tax||14,398||Employers' payrolls, including most forms of employee benefits||Paid by employers via monthly returns to State Revenue Offices||na|
|Stamp duty on conveyances||13,054||Value of properties upon transfer||Paid by new purchasers via licensed legal and accounting firms, financial institutions or direct lodgement at State Revenue Offices||na|
|Motor vehicle taxes||5,915||Value of vehicles upon transfer and other fees associated with the registration of vehicles||Paid by new owners of vehicles and registered drivers||na|
|Gambling taxes||4,772||Generally 'player loss' from various forms of gambling, including lotteries, gaming machines, casinos and racing||Paid by licensees (generally via monthly return) to State Revenue Offices in most States except Victoria where it is paid to the Victorian Commission for Gambling Regulation||na|
|Land tax||4,358||Unimproved value of land, generally exempting principal places of residence and land used in agricultural production||Paid by relevant landholders via annual account issued by State Revenue Offices||na|
|Insurance taxes||3,714||Insurance premiums and insurance policies||Generally paid by insurers via monthly return to State Revenue Offices, although Victorian insurance companies pay the levy directly to the metropolitan and country fire brigades||na|
|Other taxes||2,700||Includes a range of other levies and financial transaction taxes|
|Total state tax revenue||48,911|
|Local government taxes|
|Municipal rates||9,388||Value of properties. Rates vary by jurisdiction and type of land. In some jurisdictions, local government tax revenue may also include other taxes on immovable property.||Paid by property holders via annual rates notice issued by local government authorities||na|
|Total local government tax revenue||9,388|
|Total Australian government, state and local government taxation||320,299|
na: not available.
Source: Revenue for Australian government taxes is sourced from Budget Strategy and Outlook, 2008‑09, Statement 5: Revenue. Revenue for state and local government taxes is sourced from ABS (2008a). The total for Australian government, state and local government taxation is different to the sum of the totals for each level of government because of intergovernmental taxes. Number of taxpayers sourced from information from the ATO, Australian Treasury and the Department of Agriculture, Fisheries and Forestry.
Of the total tax revenue collected by Australian governments in 2006‑07, 90 per cent was derived from just 10 taxes (Chart 2.2). These 10 taxes accounted for 95 per cent of Australian government tax revenue and 70 per cent of state tax revenue (including 100 per cent of local government tax revenue). Ten per cent of tax revenue in 2006‑07 was contributed by the remaining 115 taxes.
Chart 2.2: Ranking of Australian taxes by revenue in 2006‑07
- Fuel excise and tobacco excise includes excise equivalent customs duties for these products.
Source: Budget Paper No. 1 2008‑09, Budget Statement 5; ABS 2008a, Australian Treasury estimates.
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