High taxes equals high rents

Australia’s High taxes and high rentsAustralia collects 2.62 per cent of GDP through capital and property taxes, compared with a global average of 1.54 per cent, reveals the latest IMD World Competitiveness Yearbook.Business confidence is up despite core economic indicators remaining weak, as Australia rises up the ranks for the first time in five years, according to the leading global assessment of national competitiveness.The Yearbook ranks countries based on more than 340 business competitiveness criteria across four categories: economic performance, government efficiency, business efficiency and infrastructure. Researchers also conduct interviews with more than 5400 international executives. The Committee for Economic Development Australia (CEDA) is the Australian partner for the yearbook. Ranking Australia 17 of the 61 countries surveyed – up from 18 in 2015 – the Yearbook found Australia’s most attractive features to be its effective legal environment, high education levels and its skilled workforce.According to Stephen Martin, CEDA’s Chief Executive Professor, Australia jumped from 27 to 12 on economic resilience – an indicator that the business community was more confident in Australia’s ability to adapt to the changing economic environment.”Overall economic performance improved slightly on the back of gains in rankings for international investment, R&D and employment,” Martin says.”However, lower GDP growth and low inflation relative to other countries have meant we haven’t improved on core economic indicators.” While Australia ranks highly in many areas of government and business efficiency, weaknesses included workforce productivity, entrepreneurship and labour relations.Of particular note, collected capital and property taxes were ranked 49 of the 61 countries, with Australia collecting 2.62 per cent of GDP compared with the average of 1.54 per cent.The Property Council of Australia’s chief executive, Ken Morrison, is unsurprised by the findings.”Australia’s property industry pays more than $72 billion each year in taxes – which is 16 per cent of all national tax revenues. We also have some of the highest costs for residential and commercial rents. This is no coincidence,” Morrison says.Martin says the results of the Yearbook reveal that affordability is not just an issue in the residential sector, but also for those renting commercial premises, with the ranking moving from 40 to 53, making Australia “one of the highest cost nations for commercial rental properties of the 61 countries assessed”.Australia fell even further in apartment rental rankings, dropping from 48 to 56, Martin adds.Internationally, the United States surrendered its status as the world’s most competitive economy after being overtaken by China, Hong Kong and Switzerland.Download the IMD World Competitiveness Yearbook.