Peter Costello Justifies High Income Tax Take

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

15 November 2002

Responding to comments made earlier this month by Opposition Treasury spokesman, Bob McMullan, Australian Treasurer, Peter Costello admitted that the income tax take as a proportion of GDP has grown under the coalition government.

However, he argued that this is due to an increase in the number of Australian citizens now in employment, rather than a hike in the amount of tax paid by each individual:

'While the Australian Labor Party is able to say that in the early 1990s the income to GDP rate was lower (the reason for) that was that unemployment was 11.3%. On the same income tax rates, it stands to reason with one million more people paying income tax, that the tax to GDP ratio would rise.'

Following a newspaper report which revealed that between 1996 (when the coalition government came to power) and 2000, the amount of income tax paid by Australians as a proportion of GDP rose from 16.4% to 17.9%, Mr McMullan told listeners to the John Laws radio programme in early November that this increase represented around $1,000 in extra taxes per household.

However, Peter Costello strongly denied that that was the case this week, arguing instead that since the government came to power:

'The whole taxation system was moved down, family benefits were increased, private health insurance rebate was introduced, one million people came into the tax system and government revenues were able to not only balance the budget but afford a decent expenditure system.'

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