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Thursday, 9 December 1976
Page: 3710

Mr Wentworth asked the Treasurer, upon notice:

What are the detailed calculations leading up to the estimate of $700m mentioned in line 6, page 30, of 1976-77 Budget Paper No. 1.

Mr Lynch - The answer to the honourable member's question is as follows:

The estimate of the cost to income tax revenue of the proposed system of trading stock valuation adjustments, given in the Budget Speech as 'of the order of $700m', was based on an estimate of the value of trading stocks held by taxable enterprises at 1 July 1975 and a stock valuation adjustment of 14.4 per cent which was the increase in the goods component of the consumer price index for the June quarter 1976 over the June quarter 1975. The estimated opening stock in 1975-76 of taxable enterprises was put at about $ 12,500m. Applying appropriate rates of tax and assuming the full adjustment to have applied to 1975-76 incomes, the loss to revenue was estimated to be about $700m in the 1976-77 financial year, after allowing for the normal lag in payment of assessments issuing in respect of 1975-76 income year returns. The Scheme is to be phased in and for 1976-77 incomes 50 per cent of the full adjustment will be allowed.

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