Labour taxes leading a boost in public revenues, OECD finds

The OECD’s Revenue Statistics 2025 report has revealed that tax revenues have been growing globally, largely driven by higher income tax revenue.

Preliminary tax statistics for 2024, which excluded Australia, indicated that the tax-to-GDP ratio increased in 22 of 36 countries from 2023 to 2024. Almost half of the revenue growth observed over the past decade was driven by personal income tax, the OECD added.

“The report shows that PIT has been one of the main drivers of overall tax revenue growth across OECD countries over the longer term,” the OECD noted.

“Between 2011 and 2023 (the most recent year for which final data is available for all 38 OECD countries), PIT revenue increased by 0.9 percentage points on average across the OECD, out of an overall increase of 1.8 percentage points.”

The average tax to GDP ratio rose from 33.7 per cent to 34.1 per cent from 2023 to 2024 amongst OECD countries. Revenue growth from personal income taxes (PIT) reflected a response to short and long-term spending pressures, the OECD said.

While the share of revenue drawn from personal income tax has grown across many OECD jurisdictions, Australia continues to lead the pack in terms of personal income tax. Personal income tax contributed 42.6 per cent of Australia’s total tax revenue in 2023, OECD data indicated. This was well above the OECD average of 23.7 per cent.

In comparison, value-added taxes (VAT) such as the GST contributed a much smaller share of Australia’s public revenue. In 2023, VAT raised 11.1 per cent of Australia’s tax revenue, compared to the OECD average of 20.5 per cent.

The report also indicated that, compared to other OECD jurisdictions, Australia is a relatively low-taxing country. In 2023, Australia’s tax-to-GDP ratio was 29.9 per cent, below the OECD average of 33.7 per cent.

Previously, tax experts have called for a re-jig of Australia’s tax system, given its heavy reliance on personal income tax, and comparatively low GST.

As structural budget pressures grow, including for defence and the NDIS, budget sustainability, tax reform and productivity have become front-and-centre issues for the government.

“In the medium-term, structural pressures on the Budget will continue to build. The era of large revenue upgrades from commodity prices appears behind us and spending pressures remain evident in several areas,” Commonwealth Bank of Australia economists have warned.