Costello Reaps Record Tax Take Fuelled By Consumer Spending

by Mary Swire, Tax-News.com, Hong Kong

16 September 2003

According to the latest economic growth figures reported by The Age, Australians paid around $19 billion more tax in the last financial year, as the national tax take grew at nearly twice the rate of income.

In fiscal 2002/2003, tax revenues grew by almost 9%, whilst growth in income earned by both individuals and companies increased by a more modest 5.5%. Although much of the increased revenue has been gathered from a housing and consumer spending boom, the figures show that the tax take increased on just about every front including income tax, payroll tax, company tax, financial taxes, council rates and fuel, and car and travel taxes.

It has been reported that some $235 billion flowed into government coffers at state and federal level last year, on the back of a strong economic performance and consumer spending boom. However, much of the increased take has been attributed to bracket creep, when wage rises outstrip the increase in the tax brackets, thus pushing more people into the higher income tax rates. Also, booming house prices have led to many homebuyers paying higher rates of stamp duty.

Income tax payers contributed the largest share of the tax revenues with PAYE employees, contractors and the self-employed putting in a combined $91 billion in tax, up $7.2 billion (8.6%) on the previous year. This compares with an average increase in household income of 3.5% over the same period.

The tax take from GST meanwhile brought in over $31 billion for the government, up 8%, whilst land taxes and council rates netted the taxman $2.5 billion and $7.4 billion respectively, almost 10% higher than the previous year in both instances.

Some commentators, such as Paul Drum, Certified Practising Accountants senior tax counsel, attribute part of the boom in tax revenue to a much tougher stance against evasion by the ATO in recent times. "People are more hesitant to accidentally omit certain amounts from their income and there is a big scare factor," Drum told The Age.

The figures have served to increase the heat on Treasurer Peter Costello, who was widely criticised for delivering a mere $4 per week tax cut in his last budget despite the fact that the government is running a fiscal surplus.

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