The arbitrary 23.9 per cent tax revenue to GDP figure

From a convenient assumption to a ‘speed limit’
by David Richardson and Bill Browne

A new report from the Australia Institute shows the recently announced 23.9 tax-to-GDP cap is entirely arbitrary, and that a strict tax cap with no policy change will severely limit choices in Government spending.

The report shows 23.9 per cent is the average tax-to-GDP ratio between the introduction of the GST and the Global Financial Crisis, a technical assumption.

The report also found implementing a strict tax ceiling of 23.9 per cent does not take into account that, in the absence of a policy change, average tax rates on personal income will constantly increase because of bracket creep.

Full report