Taxation imposes costs. Some of these arise from its effects on international competitiveness, for taxes embed themselves in prices and incomes and thereby bear on the international competitiveness of tradable goods and services and the attractiveness of investment opportunities. Taxation also tends to distort decision making in ways that detract from productivity growth. Although an indirect influence the sheer dimensions of modern taxation imply that this efficiency loss has a further significant adverse impact on international competitiveness. It has often been argued that Australia is a relatively low tax country compared with other members of the Organisation for Economic Cooperation and Development (OECD), but this is misleading, for it takes no account of the different sizes and importance of different OECD economies.
