Skip to content
Taxation

Growing number of micro-taxes risks productivity growth

Productivity Commission 2 mins read

The rise of industry levies – narrowly applied, sector-specific taxes – is creating an increasingly complex and inefficient tax system that risks limiting productivity growth, according to Productivity Commission research released today.

The report finds that the number of these industry levies has quietly grown from 26 to 248 since 1980 to become the ‘long tail’ of Australia’s tax system, collecting less than 2% of overall tax revenue.

“Without anyone noticing, these micro-taxes have compounded into a bureaucratic ‘Levyathan’. Limiting their growth in favour of more efficient taxes is a simple, actionable reform that could make a material difference to productivity growth,” said Deputy Chair Dr Alex Robson.

Levies were originally introduced in the agriculture sector to raise funds for activities that benefit producers, but they are now being imposed by policymakers on a wide range of industries, in some cases as a way of simply raising general tax revenue.

While many levies are nominally collected to cover the cost of government regulation or mitigate environmental costs, these goals could often be pursued more effectively and efficiently through the broader tax system.

“Taxes work best when they are simple and efficient – but many industry levies are relatively expensive to collect, unnecessarily distort business activity and waste the time and resources of business and government,” said Dr Robson. 

The report highlights some startling examples of this inefficiency, including a list of 70 agencies around Australia involved in administrating or collecting industry levies and a stocktake of levies ranging from the billion-dollar Major Bank Levy to the $25.62 in revenue raised from levies on wild goat carcasses in 2022.

The analysis raises concerns that policymakers may be using levies as a politically expedient way of raising additional revenue that can be managed by an individual portfolio minister or department, with little regard for the impact they may have on the tax system as a whole.

“The cost of levies is almost invisible to the average taxpayer – people notice when income taxes rise, but no-one appears to notice when a levy is passed on by their insurance provider. It is little wonder then that policymakers might see a new levy as a good way to raise revenue even when better policy options might be available,” said Dr Robson.

The report presents a rigorous, straightforward framework for determining when a new levy can be justified.

“If governments can’t restore policy discipline to the design and implementation of these levies, our chance of a more efficient tax system that fosters productivity growth risks death by a thousand micro-taxes.”

When released, this publication can be accessed from the Commission’s website at www.pc.gov.au.

[END]

 


About us:

Productivity Commission – Providing independent research and advice to Government on economic, social and environmental issues affecting the welfare of Australians.


Contact details:

Simon Kinsmore – 02 6240 3330 / media@pc.gov.au

Media

More from this category

  • Finance Investment, Taxation
  • 04/11/2024
  • 10:01
Tax Practitioners Board

TPB reflects on a strengthening of collaboration with stakeholders and supporting the tax profession

The Tax Practitioners Board (TPB) Chair, Peter de Cure AM, today released the 2023-24 Annual Report, highlighting increased engagement with tax practitioners and taxpayers, combined with a focus on high-risk practitioners. In his review of the year, Mr de Cure observed that the past 12 months have seen welcome reforms that strengthened integrity in the profession and enhanced the efficiency and effectiveness of the TPB's operations. Mr de Cure thanked tax practitioners, emphasising that the majority of the 63,000 tax practitioners continue to act both ethically and lawfully and seek to do the right thing. Pointing to the TPB’s expanded…

  • Government Federal, Taxation
  • 01/11/2024
  • 07:49
Australian Taxation Office

ATO collects $100 billion from large corporates

The Australian Taxation Office (ATO) has published the tenth annual Corporate tax transparency (CTT) report revealing the ATO received $97.9 billion in income tax from large corporates, up 16.7% from the previous year. ATO Deputy Commissioner Rebecca Saint reflected on another record year of tax paid by large corporates. ‘This is a great result for the Australian community. Tax paid in 2022-23 was again the highest since CTT reporting started. When you include the additional tax revenue raised by the Tax Avoidance Taskforce for the year, we collected around $100 billion from large corporates in 2022-23.’ Most sectors of the…

  • Finance Investment, Taxation
  • 24/10/2024
  • 15:01
Tax Practitioners Board

TPB expands consultation on draft Code Determination guidance

To ensure appropriate standards of professional and ethical conduct in the tax profession are upheld, the regulator for tax practitioners, the Tax Practitioners Board (TPB), today released draft policy guidance for public consultation. The draft policy guidance seeks to assist tax practitioners understand the new obligations in the Tax Agent Services (Code of Professional Conduct) Determination 2024 (Determination) and the TPB is seeking tax practitioner and stakeholder feedback to help shape the final version of the following draft guidance: Upholding and promoting the ethical standards of the tax profession (TPB(I) D56/2024) False or misleading statements (TPB(I) D57/2024) Managing conflicts of…

  • Contains:

Media Outreach made fast, easy, simple.

Feature your press release on Medianet's News Hub every time you distribute with Medianet. Pay per release or save with a subscription.