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BUDGET 2001-2002 : STATEMENT 5: REVENUE



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Statement 5:  Revenue

Contents

Part I:  Overview  5-3

Total revenue 5-3

Variations in revenue estimates 5-4

Part II:  Estimates of revenue  5-9

Detailed revenue estimates 5-9

Taxation revenue 5-11

Fringe benefits tax and other taxes 5-19

Non-taxation revenue 5-21

Appendices

Appendix A:  Changes in revenue estimates since MYEFO 5-24

Appendix B:  Forward estimates of revenue 5-26

Appendix C:  Revenue measures 5-28

Appendix D:  Tax expenditures 5-33

Appendix E:  Cash revenue statistics and history 5-35

 

 

Statement 5:  Revenue

Part I:  Overview

Relative to the Mid-Year Economic and Fiscal Outlook (MYEFO), the expected revenue outlook for 2000-01 has been revised upwards. This is consistent with recent strong collections of non-GST taxation revenue. Looking ahead, the temporary economic slowdown in 2000-01 is anticipated to result in lower revenue in 2001-02 than previously forecast.

Total revenue

Revenue estimates 1 for the period from 2000-01 to 2004-05 are provided in Table 1.

Table 1:  Estimates of total Commonwealth general government revenue

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(a) As published in the 2000-01 MYEFO on a Government Financial Statistics (GFS) basis. The corresponding estimates reported in the 2000-01 Budget were on an Australian Accounting Standard No. 31 (AAS31) basis.

 

Over the period from 2000-01 to 2002-03, total revenue as a percentage of gross domestic product (GDP) is projected to fall from 24.0 per cent to 22.1 per cent. Total revenue as a share of GDP remains broadly unchanged from 2002-03 to 2004-05.

  • The sizeable reduction in total Commonwealth general government revenue in 2001-02, relative to 2000-01, is due to a bring-forward in the timing of company and superannuation tax liabilities under the new Pay As You Go (PAYG) system. This provides a once-off boost to revenue in 2000-01. (See Box 1 for further information.)
  • The fall in the total revenue to GDP ratio in 2002-03 reflects lower non-tax revenue and continuing restrained tax revenue growth. Non-tax revenue is expected to decline from 2001-02 to 2002-03, due to a reduction in projected dividends from Government Business Enterprises (GBEs) and other associated entities.
  • Tax revenue as a proportion of GDP is expected to remain broadly unchanged from 2001-02 to 2004-05 at around 20.9 per cent.

Variations in revenue estimates

Table 2 reconciles this Budget’s revenue estimates with those at the 2000-01 MYEFO and the 2000-01 Budget in terms of policy decisions, and economic parameter and other variations.

Table 2:  Reconciliation of total Commonwealth general government revenue estimates from 2000-01 Budget to 2001-02 Budget (a)

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(a) The changes in the revenue estimates for 2000-01 and 2001-02 since the 2000-01 MYEFO are summarised by head of revenue at Appendix A.

 

Sin ce MYEFO, estimated total Commonwealth general government revenue has been revised up in 2000-01, largely due to stronger collections of PAYG withholding revenue and company tax revenue. Estimated revenue in 2001-02 and the forward years has been revised down since MYEFO, largely as a result of lower expected profit growth, lower expected excise revenue and policy decisions.

Policy decisions

Policy decisions taken since MYEFO are expected to reduce revenue by around $1.1 billion in 2001-02, growing to around $2.2 billion in 2003-04. The major policy decisions include:

  • a 1.5 cents per litre reduction in petrol and diesel excise from 2 March 2001, and the abolition of the semi-annual consumer price index (CPI) indexation of petroleum excise (estimated to cost around $4.6 billion over the four years from 2001-02 to 2004-05);
  • an increase in the effective tax free threshold and Medicare levy threshold for senior Australians and pensioners (estimated to cost around $1.5 billion over the four years from 2001-02);
  • the withdrawal of the entity tax exposure draft legislation — in response to concerns raised in public consultations that the existing draft legislation did not strike an appropriate balance between protecting legitimate small business and farming arrangements while addressing tax abuse in the trust area (estimated to cost $1.1 billion over the four years from 2001-02);
  • a reduction in draught beer excise (estimated to cost $630 million over the four years from 2001-02);
  • cost recovery arrangements that will partially fund measures to prevent foot and mouth disease and other quarantine risks, involving an increase in the passenger movement charge to $38 and full cost recovery for containers (estimated to raise around $400 million over the four years from 2001-02);
  • the initiative announced in Backing Australia’s Ability to introduce a 175 per cent tax concession for companies that improve their research and development effort (estimated to cost $335 million over the four years from 2001-02);
  • changes to simplify the Business Activity Statement (BAS) to allow eligible taxpayers the choice of paying their PAYG instalments annually, or use the instalment rate times instalment income method (estimated to cost $230 million over the four years from 2001-02); and
  • an increase in annual GSM 900 licence fees to align the license fees more closely with the market value of the mobile phone spectrum (estimated to raise $128 million over the four years from 2001-02).

 

Parameter and other variations

The revenue estimate for 2000-01 has been revised up by around $3.6 billion since MYEFO as a result of economic parameter and other variations. This is driv en principally by:

  • higher than anticipated collections of PAYG withholding revenue to end-March 2001 of around $1.3 billion. This indicator of labour market performance is somewhat stronger than other employment and job vacancy data. It is also possible that some of the recent strength in PAYG withholding collections reflects increased compliance by taxpayers following the introduction of The New Tax System , as well as a possible trend away from remunerating employees through fringe benefits;
  • higher than anticipated collections of company tax revenue to end-March 2001 of around $0.6 billion and significantly higher expected collections for the remainder of 2000-01; and
  • a higher estimate of petroleum resource rent tax (PRRT) revenue , which in part reflects timing factors relating to the utilisation of deductions, boosts revenue in 2000-01 and reduces revenue in 2001-02.

However, this increase to revenue in 2000-01 is partly offset by a lower estimate of petroleum excise revenue, reflecting weaker than expected collections since MYEFO (collections were around $0.4 billion below expectations to end-March 2001).

In 2001-02, economic parameter and other variations have reduced estimated revenue by around $1.2 billion since MYEFO. The major factors contributing to this overall decrease are:

  • a lower estimate of gross other individuals revenue, reflecting downward revisions to unincorporated business profit growth and reduced dividend payments to individuals (consistent with downward revisions to forecast company profit growth);
  • a reduction in estimated company tax revenue, mainly reflecting the lagged effect of expected weaker profit growth in 2000-01;
  • a reduction in estimated PRRT revenue, due to the timing factors discussed above; and
  • a lower estimate of tobacco excise revenue, reflecting both a revised outlook for tobacco consumption in the light of continued weakness in collections through 2000-01 and the increased use of the new anti-smoking drug Zyban .

These downwards revisions to forecast taxation revenue in 2001-02 are partly offset by an upwards revision of around $1.8 billion to expected dividend revenue from GBEs and other associated entities.

Furthermore, estimated PAYG withholding revenue in 2001-02 is broadly unchanged from MYEFO, with the positive effect of stronger collections in 2000-01 offsetting the negative impact of lower forecast growth in employment and wages.

Box 1:  Cash taxation revenue estimates

A comparison of taxation revenue on cash and accrual bases is provided in the table below.

Total taxation revenue on cash and accrual bases

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Accrual estimates are prepared using the Tax Liability Method (TLM) of revenue recognition , under which revenue is recognised when an assessment of a tax liability is made or cash payment is received by the Australian Tax Office (ATO). This method retains some elements of cash revenue recognition, for example, when assessment and payment occur at the same time.

The difference between the cash and accrual estimates of taxation revenue can be largely explained by the deferral of company and superannuation tax payments during the transition to the new PAYG system from 2000-01.

The new PAYG arrangements seek to better align company tax payments with the period in which income is earned. This has created an overlap of company tax payments for business, because payments of tax obligations for 1999-2000 and PAYG instalments for 2000-01 both arise during 2000-01.

  • For a medium-sized company, for example, there would have been six payments due, instead of the usual four. However, the Government has implemented transitional arrangements to assist companies to move to the new system over a number of years.

Continued…

 

Box 1:  Cash taxation revenue estimates (continued)

  • The transitional arrangements reduce the cash impact of this overlap by allowing companies to spread some payments of the 1999-2000 tax obligations over the following 2½ to 5 years.
  • The full amount of the overlap of company tax obligations is reflected in the accrual revenue estimate for 2000-01, as this is the year in which the liabilities are assessed. However, the same overlap is not fully reflected in the cash estimates for 2000-01 since companies do not have to actually pay the entire liability in that year. Companies can spread cash payments of the overlapping liabilities in interest free instalments over the following 2½ to 5 years.

Relative to expectations at MYEFO, there has been a lower take-up of the transitional arrangements to defer company and superannuation tax payments. This has boosted cash estimates of company and superannuation tax revenue in 2000-01 but has reduced cash revenue estimates in 2001-02 and the forward years. However, a lower than expected take-up of the option to defer company and superannuation tax payments has no effect on estimates of accrual revenue.

 

Part II:  Estimates of revenue

Detailed revenue estimates

Table 3 compares revenue estimates by head of revenue for 2001-02 with the corresponding estimates for 2000-01.

Table 3:  Detailed estimates of Commonwealth general government revenue

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  1. Includes Medicare levy revenue.
  2. Includes the superannuation contributions surcharge.
  3. Includes amounts withheld for failure to quote a Tax File Number (TFN) or an Australian Business Number (ABN).
  4. Indirect taxes exclude surcharge revenue raised by the Commonwealth on an agency basis and paid to the States and Territories as Revenue Replacement Payments (RRPs) in 2000-01. While RRPs were abolished on 1 July 2000, the final RRP liability is collected and paid to the States in 2000-01.
  5. Includes the wine equalisation tax, luxury car tax and the final wholesale sales tax liability.
  6. Consistent with GFS reporting standards, excludes fringe benefits tax collected from Commonwealth government agencies (estimated at $260 million in 2000-01 and $270 million in 2001-02).

 

In 2001-02 total revenue is expected to decrease by $2.2 billion, while taxation revenue is expected to decrease by $3.9 billion, relative to estim ated revenue in 2000-01. These decreases are primarily attributable to the bring forward of company and superannuation tax payments following the introduction of the new Pay As You Go (PAYG) system in 2000-01, which provide a one-off boost to revenue in 2000-01 (see Box 1 in Part I).

The major movements in taxation revenue heads between 2000-01 and 2001-02 include:

  • a decrease in company tax revenue of around $7.5 billion (or 22 per cent), largely reflecting the bring-forward of tax payments under the PAYG system in 2000-01 and a cut to the company tax rate to 30 per cent in 2001-02;
  • an increase in PAYG withholding revenue from wages and salaries of around $3.9 billion (or 5 per cent) which, while high in absolute terms, grows broadly in line with underlying growth in wages and employment;
  • an increase in gross other individuals revenue of around $2.2 billion (or 16 per cent), largely reflecting temporarily low collections in 2000-01 as a result of the introduction of the PAYG system;
  • a decrease in PRRT revenue of around $0.9 billion (or 39 per cent), mainly reflecting timing factors relating to the utilisation of deductions, which boost revenue in 2000-01 and reduce revenue in 2001-02;
  • a decrease in superannuation tax revenue of around $0.9 billion (or 17 per cent), largely reflecting the bring-forward of tax payments under the PAYG system in 2000-01; and
  • significantly lower revenue from other indirect taxes, due to the abolition of wholesale sales tax (WST) from 1 July 2000 (the final WST tax liability of around $1.3 billion is recognised in 2000-01).

The Budget revenue estimates are strongly influenced by forecast growth and the expected composition of economic activity. The 2001-02 revenue estimates are based on the following major economic assumptions :

  • growth in nominal GDP of around 4½ per cent (revenue tends to be more sensitive to growth in nominal GDP than to growth in real GDP);
  • average earnings growth of around 3¾ per cent;
  • growth in wage and salary employment of around 1 per cent; and
  • growth in company income of around 3½ per cent.

An analysis of the sensitivity of the revenue estimates to changes in the major economic parameters is provided at Statement 2, Appendix B.

Taxation revenue

Individuals income tax

Table 4 provides estimates for 2000-01 and 2001-02 for the various income tax categories applying to individuals.

Table 4:  Individuals income tax

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Gross PAYG withholding

Gross PAYG withholding includes all taxes withheld from payments under the PAYG system, aside from amounts withheld because no TFN or ABN has been quoted. The bulk of gross PAYG withholding revenue arises from tax withheld from salary and wage income.

From 1 July 2000, the former Pay As You Earn (PAYE) system, prescribed payments system (PPS) and reportable payments system (RPS) were replaced by the integrated PAYG system.

Under the PAYG system, individuals who were in the PPS and qualified for an ABN could choose to enter into voluntary withholding arrangements. Tax withheld from such individuals (estimated to be around $800 million in 2001-02) is recorded under gross PAYG withholding.

The remaining tax that would have been collected under the PPS is now being collected through the PAYG instalment system or as payment on assessment. These payments (estimated to be around $1.9 billion in 2001-02) are recorded under the gross other individuals head of revenue.

Gross PAYG withholding revenue, inclusive of revenue from the Medicare levy, is expected to increase by around $3.9 billion or 5 per cent in 2001-02, consistent with the combined effect of growth in wages and employment of around 5 per cent.

Gross other individuals

The gross other individuals category consists of income tax paid by individuals other than that collected through the PAYG withholding system. It comprises:

  • PAYG instalments (from individuals); and
  • debit assessments on income tax returns (that is, where tax credits are insufficient to meet the tax liability on assessment).

Taxpayers in this category derive their income from a number of sources, including unincorporated businesses, primary production, investments, salaries and wages (when PAYG withholding credits are insufficient) and capital gains.

Under The New Tax System , most gross other individuals revenue is collected through the PAYG instalment system. Individuals who are registered for the goods and services tax (GST) and individuals with tax liabilities of $8,000 or more will generally make quarterly payments. Individuals who are not registered for the GST with liabilities of less than $8,000 have the choice of making quarterly payments or an annual payment in April.

Most tax payments formerly made under the PPS or RPS are now made as PAYG instalments, with the remainder expected to fall under PAYG withholding.

Gross other individuals revenue, inclusive of revenue from the Medicare levy, is expected to increase by $2.2 billion (or 16 per cent) in 2001-02. This is largely attributable to revenue in 2000-01 being temporarily reduced as a result of the introduction of the PAYG system.

  • The introduction of the PAYG system resulted in only three quarterly instalments in 2000-01 because the due date for the final payment falls into 2001-02 .

Abstracting from the impact of the introduction of the PAYG system, underlying other individuals taxation revenue is expected to increase by around $0.3 billion in 2001-02. (This estimate in part reflects expected growth in small business income of around 2.7 per cent.)

Individual income tax refunds

A final assessment of the tax liabilities of individual taxpayers is made on the basis of returns lodged after the end of a financial year. Refunds are made where tax credits exceed the fi nal assessment. Where tax credits are insufficient to meet the final tax liability, taxpayers make an additional payment, which is recorded under the gross other individuals income tax category.

Refunds to individuals are expected to increase by around 1 per cent in 2001-02, a little lower than underlying growth in gross individuals taxation revenue, due to the impact of the substantial personal income tax cuts delivered on 1 July 2000. (Lower income taxes paid by individuals in 2000-01 will begin to impact on refunds in 2001-02 when individuals lodge their tax returns for the 2000-01 income year.)

Medicare levy

Revenue from the Medicare levy is expected to rise from $4,605 million in 2000-01 to $4,855 million in 2001-02, mainly reflecting higher taxable incomes of individuals. (In Table 3, this revenue is included in the estimates of gross PAYG withholding, gross other individuals and refunds.)

Company and other income tax

Table 5 provides estimates for 2000-01 and 2001-02 for company and other income tax categories.

Table 5:  Company and other income tax

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  1. Includes the superannuation contributions surcharge.
  2. This item includes amounts withheld for failure to quote a TFN or an ABN.
Company income tax

As part of The New Tax System , the general tax rate for companies was reduced from 36 per cent to 34 per cent for the 2000-01 income year, with concessional rates applying to certain income of life insurance companies, registered organisations, pooled development funds, small credit unions and offshore banking units. This rate will fall further to 30 per cent in the 2001-02 income year. The further reduction in the company tax rate is estimated to reduce revenue by around $2 billion per annum from 2001-02.

Commencing in the 2000-01 income year, the new company tax payment arrangements under the PAYG system have brought forward payments of company tax. This has created an overlap of company tax payments relating to obligations for 1999-2000 and PAYG instalments for 2000-01. While the Government has allowed companies to defer some of the liabilities arising from the overlap of the new and existing payment arrangements, the full liability is recorded as having accrued as revenue in 2000-01. Accordingly, the introduction of PAYG results in a one-off boost to company tax revenue in 2000-01.

Abstracting from this one-off factor, forecast growth in company profits is expected to add around $210 million to company tax revenue In 2001-02.  Consistent with lower forecast company profit growth, particularly in 2000-01, this increase is lower than f orecast at MYEFO.

Superannuation funds tax

Superannuation funds are taxed at a concessional rate of 15 per cent in relation to investment income and contributions received. The tax payments of superannuation funds are made a ccording to the schedule that applies to company income tax.

As for company tax, the decline in estimated superannuation tax revenue in 2001-02 largely reflects the bring-forward of superannuation tax payments under PAYG. This aside, expected growth in earnings is expected to add around $30 million to superannuation tax revenue in 2001-02. Consistent with lower expected earnings growth, this increase is lower than forecast at MYEFO.

Other withholding tax

Other withholding tax is levied on:

  • income payments to residents who, when making an investment, do not supply the investment body with a TFN;
  • business-to-business transactions where an ABN is not quoted by the supplier from 1 July 2000;
  • certain interest, dividend and royalty payments to non-residents; and
  • payments made to Aboriginal groups for the use of Aboriginal land for mineral exploration and mining.

Total other withholding tax revenue is expected to increase in 2001-02 by 4 per cent.

Petroleum resource rent tax

Petroleum resource rent tax (PRRT) 2 applies to offshore areas other than the North West Shelf production and associated exploration areas, which are subject to excise and royalty arrangements. PRRT is levied at the rate of 40 per cent of taxable profit from a petroleum project. A liability arises when a project’s assessable receipts exceed deductible expenditure.

A company involved in a petroleum project is able to deduct exploration expenditure, plant and equipment spending and the direct administration costs associated with the project. (Provisions also allow for exploration expenditure incurred in the development of one project to be offset against the assessable receipts of another PRRT-liable project.)

PRRT revenue is expected to decrease by around 39 per cent in 2001-02. This is primarily due to timing factors relating to the utilisation of deductions, which boost revenue in 2000-01 and reduce revenue in 2001-02. To a lesser extent, the decrease in PRRT revenue also reflects the impact of recent declines in world oil prices and an anticipated decrease in domestic oil production in 2001-02. The world price of crude oil is assumed to be US$26¼ per barrel in 2000-01 and US$22½ per barrel in 2001-02.

Indirect tax

Table 6 provides estimates for 2000-01 and 2001-02 for the various categories of indirect taxation .

Table 6:  Indirect tax (a)

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  1. Excludes surcharge revenue raised by the Commonwealth on an agency basis and paid to the States and Territories as RRPs in 2000-01. While RRPs were abolished on 1 July 2000, the final RRP liability is collected and paid to the States in 2000-01.
  2. Includes aviation gasoline, aviation turbine fuel, fuel oil, heating oil and kerosene.
  3. Customs duty includes duties imposed on imported petroleum products, tobacco, beer and spirits, which are analogous to excise duty on these items.
  4. Estimates of WET revenue include the offsetting revenue effects of the WET rebate for cellar door and other sales.
  5. WST was abolished on 1 July 2000; however, the final liability is recognised in 2000-01.
Excise

The major categories of excise revenue include petroleum products excise, crude oil excise, tobacco excise, and e xcise on certain alcoholic beverages.

Petroleum products excise includes excise on motor spirit (petrol), diesel fuel, aviation gasoline, aviation turbine fuel, fuel oil, heating oil and kerosene. It is imposed at specific rates per litre of product.

The growth in excise revenue from unleaded petrol in 2001-02 of around 10 per cent principally reflects the continued substitution of unleaded petrol for leaded petrol together with the phase-out of leaded petrol.

Leaded petrol has been largely phased out between December 2000 and February 2001 with the introduction of lead replacement petrol. As lead replacement petrol is classified as unleaded petrol, the contribution to excise revenue from leaded petrol is expected to be negligible in 2001-02.

Growth in the consumption of petrol (leaded and unleaded) in 2001-02 is expected to be 2.7 per cent.

Excise revenue from diesel is expected to grow moderately in 2001-02 relative to previous years, reflecting the decision of the Government to abolish excise indexation for petroleum products and the 1.5 cents per litre cut to the rate of diesel excise.

Other petroleum products excise includes excise revenue from aviation gasoline, aviation turbine fuel, fuel oil, heating oil and kerosene. All revenue from the excise duty on aviation gasoline and aviation turbine fuel contribute to the funding of aviation programmes. The rates of excise applying to aviation fuels are adjusted, as necessary, depending on the funding requirements of those programmes.

Crude oil excise includes excise collected from two sources: offshore fields in the North West Shelf production licence areas that are not subject to PRRT, and onshore fields and coastal waters. Crude oil excise is the only excise not to be levied on a volumetric basis (that is, where excise is applied per unit of quantity). Instead, the calculation of crude oil excise is based on both the quantity of crude oil sold and the sale price.

Estimated crude oil excise in 2000-01 has increased since MYEFO, reflecting strong collections this financial year. However, revenue from crude oil excise is expected to fall significantly in 2001-02 relative to 2000-01, due to lower world crude oil prices and lower production.

Other excise is derived from beer, potable spirits and tobacco products. It is imposed:

  • on a per stick basis for cigarettes and a per kilogram basis for other tobacco products;
  • on the alcohol content of draught and packaged beer; and
  • on the alcohol content of other products, such as spirits and certain ready to drink products.

Wine is exempt from excise and is instead subject to the wine equalisation tax (WET) .

Other excise revenue is expected to decrease by around 1 per cent, reflecting the first full year effect of the introduction of the concessional rate of excise for draught beer and an expect ed decline in tobacco consumption of around 4 per cent.

Estimated excise revenue from tobacco in 2000-01 is broadly consistent with the estimate at MYEFO. However, the tobacco estimate at MYEFO was revised down by in excess of $500 million relative to the 2000-01 Budget. Collections of tobacco excise have been weak since 1 July 2000, which reflects a number of influences including:

  • a possible consumer demand response to higher tobacco prices following the introduction of The New Tax System ; and
  • increased use of the anti-smoking drug Zyban .

There have been some suggestions that higher tobacco prices may have contributed to a growing illicit tobacco market (known as chop-chop ). However, the Government has significantly increased the penalties for the sale of illicit product in 2000-01 and, together with increased enforcement activity, these measures have limited the size of any illegal activity.

Excise indexation

In the past, the rates of duty for excisable commodities ( with the exception of crude oil) have been adjusted each August and February in line with half-yearly consumer price index (CPI) movements.

In March 2001, the Government announced that excise indexation would be abolished for all petroleum products. Beer, spirit and tobacco excise rates will continue to be indexed in line with half-yearly CPI movements.

If the change in the CPI is negative, the excise rate is not reduced but instead the decline is carried forward to offset the next positive CPI movement.

Excise rates since 1 July 2000 are shown in Table 7.

Table 7:  Excise rates

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Customs duty

Customs duty is imposed ei ther as a percentage of the value of the imported good or on a volumetric basis for excisable-like products (for example, dollars per litre).

Tariffs on passenger motor vehicles, and textile, clothing and footwear account for around one-third  of the total duty collected. A further one-third of customs duty is duty imposed on imports of petroleum products, tobacco, beer and spirits, which is analogous to excise duty on these items. Other dutiable goods currently attract a general tariff rate of 5 per cent.

Customs duty revenue in 2001-02 is estimated to grow by around $200 million or around 5 per cent.

Other indirect taxes

Wholesale sales tax (WST) was imposed on a range of goods destined for consumption in Australia and levied at the last wholesale or import point on the wholesale sales value of taxable goods. From 1 July 2000, WST was abolished as part of The New Tax System .

Consistent with the tax liability method of revenue recognition, the 2000-01 WST estimate (see Table 6) reflects the final WST liability.

In the absence of the two specific indirect tax measures outlined below, the abolition of WST would have meant that the price of certain goods would have fallen more than was intended by general indirect tax reform. To counter this, from 1 July 2000, all grape wine, wine products, fruit and vegetable wine, cider, perry, mead and sake became subject to the wine equalisation tax (WET) . The WET is levied at a rate of 29 per cent, with tax being paid on the value of the goods at the last wholesale sale, or equivalent value.

Similarly, a luxury car tax (LCT) of 25 per cent was introduced from 1 July 2000. The LCT applies to the GST exclusive price of a car above the LCT threshold ($55,134 in 2000-01). This was put in place to ensure that, when the higher WST rate of 45 per cent was removed from luxury cars and the GST was introduced, the price of luxury cars fell by about the same amount as other cars.

WET revenue is expected to increase by around 19 per cent in 2001-02, to a level reflecting the first full year effect of the tax. Most revenue from the WET is paid upon lodgement of the quarterly Business Activity Statement (BAS), of which there were only three in 2000-01. Luxury car tax revenue is expected to increase by around 16 per cent in 2001-02 for similar reasons.

Fringe benefits tax and other taxes

Fringe benefits tax

Fringe benefits tax (FBT) applies to a range of benefits provided by employers to their employees or associates of their employees. Fringe benefits tax revenue is expected to increase by around 6 per cent in 2001-02, largely due to ongoing remuneration growth (see Table 3). FBT revenue is also expected to be boosted in 2001-02 by the modification of the FBT gross-up rate (to ensure neutrality of treatment between fringe benefits and cash salaries following the introduction of the GST on 1 July 2000), which has its first full year effect in 2001-02.

Agricultural levies and other taxes

Table 8 shows estimates of agricultural levies and other taxes for 2000-01 and 2001-02.

Table 8:  Agricultural levies and other taxes

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  1. Includes all other tax revenue collected by Commonwealth agencies.

Total revenue from agricultural levies and other taxes is forecast to increase in 2001-02 by about 4 per cent. This is largely due to an in crease in Agricultural production taxes — domestic revenue administered by the Department of Agriculture, Forestry and Fisheries. These taxes are projected to increase from $473 million in 2000-01 to $512 million in 2001-02, largely due to expected growth in collections from the retail milk levy.

Wool tax revenue is estimated to fall in 2001-02 by around 29 per cent, due to the reduction in the wool tax rate. Revenue from Agricultural production taxes — export and non-agricultural levies are forecast to remain broadly unchanged. Broadcasting licence fees are forecast to increase by 5 per cent, due to the increase in mobile telephony licence fees for carriers.

The remaining category of other taxes, which is expected to increase by around 5 per cent, includes the coalmining long service leave levy, ch ild support fees and fines, and a range of levies administered by the Department of Transport and Regional Services including aircraft noise, stevedoring and marine navigation levies.

 

Non-taxation revenue

Table 9 p rovides estimates for 2000-01 and 2001-02 of the various categories of non-taxation revenue.

Table 9:  Non-taxation revenue

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  1. Includes all other non-tax revenue collected by Commonwealth agencies.

Sales of goods and services

This category consists of revenue from the direct provision of goods and services by the general government sector.

The expected increase in sales of goods and services in 2001-02 is largely due to an increase in the passenger movement charge from $30 to $38.  This will fund the increased cost of inspecting passengers, mail and cargo at Australia’s borders to mitigate the risks of introducing foot and mouth disease into Australia.

Interest

Interest from other Governments

This category mainly consists of revenue from the States and Territories on General Purpose a nd Specific Purpose borrowings.

The Commonwealth receives interest payments from the States in respect of General Purpose borrowings made on behalf of the States under the State Governments’ Loan Council Programme (and from the Northern Territory in respect of advances made under similar general purpose capital assistance arrangements). Payments relating to these advances are made, in turn, by the Commonwealth to bond holders.

Interest from the States on General Purpose borrowings is declining as a result of the June 1990 Loan Council decision that the States and Territories make additional payments to the Commonwealth each year to facilitate the redemption of all maturing Commonwealth securities issued on their behalf. The reduction in interest revenue from the States and Territories is matched by a reduction in public debt interest expenses.

The Commonwealth also receives interest on Specific Purpose Borrowings to the States, including on advances made under the Commonwealth-State Housing Agreements, States (Works and Housing) Assistance Acts, Northern Territory Housing Advances, and by the Australian Capital Territory on debts assumed upon self-government. Interest from the States on Specific Purpose borrowings will be lower in 2001-02 compared with 2000-01, reflecting the repayment of debt by the States in 2000-01.

Interest from other governments is expected to decrease in 2001-02, due to a reduction in the remaining stock of debt issued by the Commonwealth on behalf of the State and Territory governments.

Interest from other sources

This item includes interest income on Commonwealth cash balances and on other financial assets. It excludes swap transactions entered into as part of the Commonwealth’s debt management strategy, as they are classified as financi ng transactions under Government Finance Statistics (GFS) standards. The Australian Office of Financial Management (AOFM) is responsible for the management and reporting of the Commonwealth’s net debt portfolio.

Interest from other sources is projected to decrease between 2000-01 to 2001-02 by 17 per cent. In part, this reflects a reduction in interest payments from the Snowy Mountain Hydro Electricity Authority, following the decision to corporatise and refinance the Authority.

Dividends

The main sources of dividends are from the Commonwealth’s Government Business Enterprises and the Reserve Bank of Australia (RBA). Dividend payments from the RBA can be volatile, as they are sensitive to movements in interest rates and the exchange rate.

The Royal Australian Mint also provides dividend revenue to the Commonwealth.  This includes royalties from numismatic coin sales and annual dividends from profits the Mint makes as the manufacturer of these products.

Total dividends are projected to incre ase by around 112 per cent in 2001-02, largely due to higher dividends from the RBA.

Petroleum royalties

Petroleum royalties are paid by producers operating in the North-West shelf oil and gas fields off Western Australia.

These royalties are expected to d ecrease in 2001-02 by around 42 per cent, due to falling petroleum production and a forecast reduction in world oil prices. A substantial proportion of these royalties are paid to the Government of Western Australia.

Other sources of non-tax revenue

Other non-tax revenue includes Child Support Trust Revenue (collected by the Child Support Agency) and revenue from the State and Territory governments (to meet the cost to the ATO of administering the GST on their behalf). It al so includes revenue from Higher Education Contribution Scheme (HECS) student loans and seigniorage from circulation coin production.

Other non-tax revenue is expected to decline by around 11 per cent in 2001-02.  This mainly reflects a reduction in revenue from outstanding HECS debts owed to the Commonwealth and a reduction in revenue received from the States to meet the cost of administering the GST.

 

Appendix A:  Changes in revenue estimates since MYEFO

Table A1:  Reconciliation of 2000-01 revenue estimates

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  1. Includes revenue from the Medicare levy.
  2. Part of the change since the Mid-Year Economic Fiscal Outlook (MYEFO) is due to a reallocation of $295 million from gross other individuals revenue to Pay As You Go (PAYG) withholding revenue, due to a reassessment of the distribution of revenue from the former prescribed payments system (PPS) scheme. Accordingly, for 2000-01, the MYEFO estimates of PAYG withholding revenue should be increased by $295 million, with a corresponding decrease in gross other individuals revenue, to be on a comparable basis to the current Budget estimates.

 

Table A2:  Reconciliation of 2001-02 revenue estimates

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  1. Adjusted since MYEFO to reflect a reallocation of revenue across company tax, gross other individuals, superannuation funds tax and individual refunds. However, the MYEFO estimate for total income tax has not changed.
  2. Includes revenue from the Medicare levy.

 

Appendix B:  Forward estimates of revenue

Forward estimates of the major categories of revenue, for the period from 2001-02 to 2004-05 are provided in Table B1.

Table B1:  Forward estimates of revenue

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  1. Includes FBT, agricultural levies and other taxes.

 

The forward estimates of revenue are u nderpinned by the conventional assumption of no change in current policy. Consequently, the forward estimates of revenue only reflect projected growth in economic parameters and policy measures contained in this and previous budgets, including those associated with The New Tax System .

Taxation revenue generally moves in line with economic activity during periods of steady economic growth (as depicted by the economic projections in this Budget), but tends to swing more sharply during periods of economic contraction and rapid expansion (in particular, more sharply than nominal GDP growth).

Total revenue is expected to remain at around 22.1 per cent of GDP from 2002-03 to 2004-05. (Growth in all categories of total revenue in 2001-02 are explained in detail in Part II of this Statement.)

Total tax revenue is expected to remain at around 20.9 per cent of GDP across the forward estimates, with a slightly lower estimate in 2002-03. Lower tax revenue in 2002-03 in part reflects a one-off deferral in the timing of tax payments from annual Pay As You Go (PAYG) taxpayers that are not registered for the GST.

  • A projected increase in income tax as a proportion of GDP over the forward years is offset, in contrast to last year, by a decline in indirect tax as a proportion of GDP, mostly reflecting the decision to abolish petroleum excise indexation.

Non-tax revenue is expected to decrease in 2002-03, reflecting lower projected dividends from GBEs and other associated entities (including the Reserve Bank of Australia). Non-tax revenue is expected to remain at around 1.3 per cent of GDP in 2003-04 and 2 004-05.

 

Appendix C:  Revenue measures

Table C1 provides a summary of the revenue measures introduced since the MYEFO . A full description of all 2001-02 Budget revenue measures can be found in Part I of Budget Paper No. 2, Budget Measures 2001-02 .

Table C1:  Revenue measures since the 2000-01 MYEFO (a)

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Table C1: Revenue measures since the 2000-01 MYEFO (a) (continued)

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Table C1: Revenue measures since the 2000-01 MYEFO (a) (continued)

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* The nature of the measure is such that a reliable estimate cannot be provided.

(a) A minus sign before an estimate indicates a reduction in revenue, no sign before an estimate indicates a gain to revenue.

(b) Measures may not add to total due to rounding.

 

Table C2: Revenue measures up to the 2000-01 MYEFO (a)(b)

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Table C2: Revenue measures up to the 2000-01 MYEFO (a)(b)

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* The nature of the measure is such that a reliable estimate cannot be provided.

(a) A minus sign before an estimate indicates a reduction in revenue, no sign before an estimate indicates a gain to revenue.

(b) These estimates are as published in 2000-01 MYEFO. Descriptions of the measures are provided in the MYEFO publication.

(c) Measures may not add to total due to rounding.

 

Appendix D:  Tax expenditures

This appendix provides a brief overview of the cost of tax concessions provided by the concessional tax treatment of specific activities and/or groups.

Tax concessions provide a benefit to a specified activity or class of taxpayer. Tax concessions can be delivered in a variety of ways, for example by a tax exemption, tax deduction, tax rebate, reduced tax rate or by deferring a tax liability. The Government can use tax concessions to allocate resources to different activities in much the same way that it can use direct expenditure programmes. For this reason, and noting their direct impact on the fiscal balance, these tax concessions are generally called tax expenditures .

The data reported in this appendix are consistent with tax expenditure data reported in the 2000 Tax Expenditures Statement . The Tax Expenditures Statement (TES) is an annual statement of Commonwealth tax expenditures. 

Table D1 provides estimates of total tax expenditures for the period 1997-98 to 2004-05. There are several major considerations that need to be taken into account when analysing these data.

  • These figures may understate the total cost of tax expenditures, as some identified tax expenditures have not been estimated due to a lack of data and the TES does not necessarily provide a comprehensive listing of all tax expenditures.
  • Some caution should be exercised when using these tax expenditure estimates to measure the amount of tax revenue forgone. Tax expenditure estimates measure the benefit of the tax concession to the recipient, not the impact on the fiscal balance from the removal of that tax expenditure. The two might differ due to behavioural responses or for other reasons (see chapters 1.4 and 2.3 of the 2000  Tax Expenditures Statement ).
  • Trends in aggregate tax expenditures over time will reflect both changes to the cost of individual tax expenditures and changes in the coverage of tax expenditures being costed.
  • Tax expenditure aggregates are net aggregates as they include the offsetting effects of negative tax expenditures.
  • Changes over time in methodology and data used to calculate the value of particular tax expenditures can result in large revisions to tax expenditure estimates. Therefore estimates that were provided in previous editions of the TES or in previous Budgets may not be strictly comparable to figures reported here.

Table D1:  Aggregate tax expenditures 1997-98 to 2004-05

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Measured tax expenditures are projected to decline as a proportion of GDP from 4.5 per cent in 1997-98 to around 4.0 per cent in 2004-05. The largest single contributing factor to the decline in total measured tax expenditures is the removal of accelerated depreciation under The New Tax System .

 

Appendix E:  Cash revenue statistics and history

Table E1:  Commonwealth revenue (cash basis) (a)

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Table E1:  Commonwealth revenue (cash basis) (a) (continued)

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(a) Figures up to and including 1998-99 are based on the old Commonwealth Budget Sector cash accounting framework. Figures from 1999-2000 are on a Commonwealth general government GFS basis, consistent with the Uniform Presentation Framework (UPF). As a result, the category ‘Dividends and other’ now includes many large items that were netted off revenue in outcomes prior 1999-2000, namely ‘Receipts from sales of goods and services’ (around $3 billion from 1999-2000), ‘Receipts from sales of non-financial assets’ (around $2.5 billion in 1999-2000 and 2000-01 and around $1.7 billion in 2001-02), ‘Other receipts’ (around $3 billion from 1999-2000) and ‘GST receipts related to purchases/sales’ (around $2 billion from 2000-01).

(b) Estimates.

(c) Presented on a basis inclusive of the Medicare levy. See memorandum item for Medicare levy outcomes and estimates.

(d) PPS denotes prescribed payments system (which was replaced by the new PAYG system from 1 July 2000).

(e) These items are reported net of Revenue Replacement Payments (RRPs) to the States.

(f) Excludes the diesel fuel rebate (DFR) offset to revenue, which is classified as an expense.

(g) This item includes the wine equalisation tax and the luxury car tax from 2000-01.

(h) Consistent with GFS reporting standards, FBT is no longer classified as an income tax.

(i) The Medicare levy was increased from 1.5 to 1.7 per cent for the period from 1 July 1996 to 30 June 1997 to fund the guns buy-back scheme.

(j) Outcomes and estimates of the DFR expense. Reported for informational purposes only.

 

Table E2:  Major categories of revenue as a proportion of gross domestic product (cash basis) (a)

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(a) Figures up to and including 1998-99 are based on the old Commonwealth Budget Sector cash accounting framework. Figures from 1999-2000 are on a Commonwealth general government GFS basis, consistent with the Uniform Presentation Framework (UPF). As a result, the category ‘Dividends and other’ now includes many large items that were netted off revenue in outcomes prior 1999-2000, namely ‘Receipts from sales of goods and services’ (around $3 billion from 1999-2000), ‘Receipts from sales of non-financial assets’ (around $2.5 billion in 1999-2000 and 2000-01 and around $1.7 billion in 2001-02), ‘Other receipts’ (around $3 billion from 1999-2000) and ‘GST receipts related to purchases/sales’ (around $2 billion from 2000-01).

(b) The total for the individuals category also includes refunds.

(c) The total for the income tax category also includes refunds, PRRT and other withholding tax.

(d) Petroleum products excise includes crude oil and liquid petroleum gas (LPG) excise, but excludes the DFR offset to revenue, which is now classified as an expense.

(e) Other excise comprises excise from beer, potable spirits and tobacco.

(f) This item also includes the wine equalisation tax and the luxury car tax from 2000-01.

(g) Consistent with GFS reporting standards, FBT is no longer classified as an income tax.

(h) The total for ‘other taxation revenue’ also includes agricultural levies and other taxes.

(i) Estimates.

 

Table E3:  Major categories of revenue as a proportion of total revenue (cash basis) (a)

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(a) Figures up to and including 1998-99 are based on the old Commonwealth Budget Sector cash accounting framework. Figures from 1999-2000 are on a Commonwealth general government GFS basis, consistent with the Uniform Presentation Framework (UPF). As a result, the category ‘Dividends and other’ now includes many large items that were netted off revenue in outcomes prior 1999-2000, namely ‘Receipts from sales of goods and services’ (around $3 billion from 1999-2000), ‘Receipts from sales of non-financial assets’ (around $2.5 billion in 1999-2000 and 2000-01 and around $1.7 billion in 2001-02), ‘Other receipts’ (around $3 billion from 1999-2000) and ‘GST receipts related to purchases/sales’ (around $2 billion from 2000-01).

(b) The total for the individuals category also includes refunds.

(c) The total for the income tax category also includes refunds, PRRT and other withholding tax.

(d) Petroleum products excise includes crude oil and liquid petroleum gas (LPG) excise, but excludes the DFR offset to revenue, which is now classified as an expense.

(e) Other excise comprises excise from beer, potable spirits and tobacco.

(f) This item also includes the wine equalisation tax and the luxury car tax from 2000-01.

(g) Consistent with GFS reporting standards, FBT is no longer classified as an income tax.

(h) As well as excises, customs duty, sales tax and FBT, ‘other taxation revenue’ includes agricultural levies and other taxes.

(i) Estimates.


1  All revenue estimates in this Statement are reported on an accrual basis unless otherwise specified. (Revenue estimates on a cash basis can be found in Box 1 and Appendix E.) The revenue estimates exclude GST revenue, which is collected by the Commonwealth and passed in full to the States and Territories. A discussion of GST revenue can be found in Statement 2 and Budget Paper No. 3 .


2  PRRT is levied under the Commonwealth s Resource Rent Tax Assessment Act 1987.