Tax is up every year under this government and tax as a percentage of the economy is higher under Tony Abbott and Joe Hockey than it ever was under the previous Labor government despite all of their huffing and puffing about tax. – Chris Bowen, Shadow Treasurer, interview with Hugh Rimington on Channel 10 Eyewitness News, May 12, 2015.
The $A5 billion worth of tax breaks for small business were a centrepiece of the federal budget this year and something the Opposition was keen to frame as a return to Labor policy.
In a post-budget interview, the Shadow Treasurer described corporate tax cuts and lower tax on small business as a good thing, adding that tax as a percentage of the economy is higher now than it was under the previous government.
Is that right?
Advertisement
The available data
According to data in the federal budget papers, Chris Bowen’s statement is correct.
He refers to “tax as a percentage of the economy”, which I take to refer to tax receipts as a percentage of GDP. This is indeed a standard measure used in economics to summarise the effective tax burden.
Ideally, Mr Bowen’s statement should be checked against independent data sources like the World Bank and Organisation for Economic Cooperation and Development (OECD). But unfortunately, international organisations update their databases with a lag of up to two years. (The World Economic Outlook Database of the International Monetary Fund has revenue data up to 2014, plus estimates and projections until 2019 but doesn’t distinguish between different levels of government or between tax and non-tax revenues.)
Advertisement
When asked for a data source to substantiate his statement, a spokesman for Mr Bowen directed The Conversation to the 2015 budget papers.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.