A report by the Parliamentary Budget Office on the trends of taxation should sound a large warning to governments around Australia. Our tax base is narrowing at a time when the needs of spending on areas such as pensions and healthcare are growing. Unless changes are made, the government will be forced to either cut spending on services and benefits, or its ability to consistently deliver a surplus will be ever more unlikely.

The Parliamentary Budget Office is a fully independent agency that unlike Treasury or the finance department does not report to the government. As such, it is able to deliver some hard truths. And its latest report on trends affecting the sustainability of commonwealth taxes is full of problems governments like to pretend don’t exist.

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While, as I have noted, at the moment the government is getting a nice influx of revenue, the PBO warns all signs are directed towards our tax revenue base shrinking.

The reason is a mixture of politics, policy and how we live our lives.

Taxes essentially come from three areas – labour, capital and consumption. Since 2001-02, when the GST had come into effect, the PBO has found that all three categories have fallen with the biggest fall coming from consumption.

The largest fall has come via the drop in the amount of fuel excise that has been collected – down 0.6% of GDP:

This fall is the perfect example of the mix of politics, policy and change in lifestyle that has led to lower tax revenue.

In March 2001, in panic at the polls, John Howard froze the indexation on fuel excise – no longer would it rise in line with inflation. As a result, billions of dollars in tax revenue were forgone for no good economic reason, but purely so Howard could say he was delivering cheaper petrol.

Joe Hockey reversed this decision in 2014, but the problem is that the cars we drive now are much more efficient – meaning we use less fuel per kilometre we drive and thus we pay less tax as well:

And this is only going to be further affected with the increased uptake of electric cars. Fuel excise makes up 5% of all commonwealth tax revenue – what do you do when people stop using fuel?

Our consumption habits have similarly affected tobacco excise. While the level of excise has risen dramatically over the past 15 years, the amount of tobacco being smoked has fallen equally dramatically. That is good for our health, but does represent a narrowing of the tax base.

Meanwhile our policy towards free-trade agreements has helped reduce the price of goods, but it has also reduced the amount of import excise that is raised.

And while the level of excises has been falling, so too has the level of company taxes relative to profits.

In 2007-08, company profits were worth 23.9% of GDP – slightly above the 23.8% recorded in 2016-17, and yet in 2007-08 company taxes were worth 3.9% of GDP compared to just 2.6% in 2016-17:

The reason, as the PBO notes, is that losses from previous years are now being offset against profits to reduce the taxable income. This should reduce in time, but the PBO worries that international tax planning practices designed to minimise tax liabilities will continue to erode the company tax base.

It also notes that while the company tax is being planned to be cut, unlike previously the tax cuts are not being accompanied with a broadening of the tax base by removing concessions or adding new taxes that keep the “effective tax rate” relatively level. This occurred for example in the 1980s, when the company tax cut from 49% to 39% at the same time capital gains and fringe-benefits taxes were introduced.

The PBO notes that “the progressive reduction in Australia’s company tax rate over the period to 2026-27, in the absence of any expansion of the company tax base, would be expected to put downward pressure on company tax receipts as a share of GDP”.

That would certainly reflect what has occurred in the US where the company tax cuts have led company tax revenue dropping off a cliff:

The PBO also sees few prospects for improved collection of the recourses rent tax despite increasing oil and LNG exports:

The PBO notes that the cost of developing the LNG projects has been higher than initially estimated and the falling price of LNG means companies will be able to reduce their liabilities even as Australia becomes the world’s leading producer and exporter of LNG.

All this has meant that recently our dependence upon taxes from labour – personal income tax, fringe benefits tax and superannuation contributions – has risen to its highest levels since the GST was introduced:

And the GST itself is also the product of the interaction of politics, policy and household behaviour.

In order to get the GST through the Senate, the Howard government did a deal with the Australian Democrats that saw food, health, education and other items excluded.

Since the GST was introduced while households have continued to buy the same amount of things subject to GST, they have become much cheaper:

And that means we have shifted our spending towards things that are GST free – especially rent, health, and education. We have not, however, shifted our spending habits towards GST-free food, as we now eat out much more than we did 18 years ago:

It means that one way to redresses the narrowing of out tax base would be to include some excluded items under the GST banner. The problem is that the burden of paying for rent and food is much greater for poorer people, meaning including them in the GST would be highly regressive. But including health and education would not be – although, in the case of health, it would hit older people more than younger ones:

But such moves are not even remotely likely to occur.

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The collision of politics, policy and household behaviour invariably works against any moves to raise the level of tax – especially on the GST.

And coupled with the governments’ moves to cut taxes at a time of a shrinking base, we remain headed for a collision of reality where either revenue will need to be raised, or government spending on services and benefits will have to be cut.

• Greg Jericho is a Guardian Australian columnist