The ACTU doesn't deliver the full picture on how much we're taxed.
The ACTU's recipe for national taxation reform will merely serve to weigh down our future economic growth prospects.
In research released this week the ACTU has outlined the results of a survey of 1000 people finding that a majority of respondents favour higher tax rates on high-income earners.
On the basis that ''real tax reform is reform that is directed towards satisfying Australians' needs and preferences'', the ACTU uses these survey results to commend to governments a more progressive taxation system.
The idea behind this notion is that an increase in the degree of tax progressivity will generate more revenue to fund government services. The ACTU suggests that there is significant scope for increasing taxes because Australia is a ''low tax country'' in comparison with its OECD counterparts.
According to data presented by the ACTU, taxation revenue as a proportion of GDP for Australia was 27.1 per cent in 2008-09, the sixth lowest tax to GDP ratio for 33 countries sampled. By contrast the OECD average of taxation revenue to GDP was 34.8 per cent in the same year.
Such favourable comparisons are often used by interests seeking a greater role for government in economic activity, however they tend to mislead the general public about the true size of Australian government. Accepting the figures as presented, they do indeed reveal that Australia is a tax-competitive nation state compared with small, distant European nations.
A more accurate reflection of Australian taxation competitiveness is presented, however, when we compare our tax-to-GDP ratio against our East Asian neighbours.
The comparison is less than flattering. The latest available data shows that Hong Kong has a tax-to-GDP ratio of 13 per cent, while Singapore and Malaysia have shares of taxation revenue to GDP of 14.2 per cent and 15.5 per cent respectively.
The OECD statistics, as presented by the ACTU, tend to obscure Australia's true degree of tax competitiveness since various off budget items are excluded from measures of taxation burden.
Australia imposes a compulsory superannuation scheme requiring employers to contribute to superannuation funds on behalf of their employees, which effectively acts as a tax. Based on an update of previous estimates, compulsory contributions in 2008-09 were roughly equivalent to 3.4 per cent of GDP lifting the Australian tax burden to 30.5 per cent of GDP.
Governments also impose a range of tax expenditures which reduce the headline tax burden. Incorporating the $102 billion in tax expenditures reported by the Commonwealth in 2008-09 alone adds about another 8 per cent to the Australian tax-to-GDP ratio, giving an overall figure of 38.5 per cent. Adding to this the grab-bag of tax expenditures reported by the mainland states, totalling some $13.7 billion in 2008-09, adds another percentage point to the overall taxation revenue to GDP ratio.
Given that federal, state and local budget deficits represent future taxes, it is also necessary to add the 2 per cent of GDP general government fiscal deficit. Australia now has a tax-to-GDP figure of 41.5 per cent. When these and other quasi-tax arrangements, such as those affecting the take up of private health insurance, are factored in, it is no longer clear that Australians live the charmed life of low taxation as the ACTU and other groups would have us believe.
The ACTU has dismissed recent episodes of Australian tax reform as being little more than an ''unending series'' of tax cuts. This is not quite true, as governments engaged in tax swaps that purport to be ''revenue neutral'' in theory but practically deliver more revenues to facilitate increases in public spending.
But taxation burden reductions, wherever they may be found, are desirable in that they deliver benefits for residents and businesses that remain in Australia, and present this country in a more favourable light amongst global investors.
Flatter and lower income tax rates encourage greater workforce participation, including for the benefit of growing sectors of the economy in which labour shortages are said to exist.
Lower taxation also reduces impediments for entrepreneurs to generate the additional economic wealth and, for that matter, job creation that this country needs, especially outside of mining activities. More generally, flattening and lowering tax scales reduces the economic deadweight losses providing an important basis to enliven economic activity across the board.
Therefore it is a surprise that the peak body of a movement, claiming to represent workers' interests, should oppose tax cuts that would prove so beneficial on numerous fronts.
The Australian economy is presently on its knees due to post-GFC economic stagnation, poor productivity, cost of living pressures, and the impending threat of new mining and carbon taxes.
The sensible resolution to this impasse is through reducing government intervention, with a focus on taxation reductions, and not pursuing the ACTU path toward distortionary progressive taxes that would punish private sector entrepreneurship and hamper productivity improvements.
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