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Appendix A: Forward Estimates of Revenue
Forward estimates of the major categories of revenue, for the period from 2000-01 to 2003-04 are provided in Table A1.
Table A1: Forward Estimates of Revenue
(a) Excludes the DFRS offset to revenue (which has been reclassified as an expense).
(b) Includes FBT and Other Taxes.
The forward estimates of revenue have been prepared on the conventional assumption of no change in current policy. Therefore, the forward estimates of revenue primarily reflect projected growth in economic parameters and policy measures contained in this and previous budgets, including those associated with The New Tax System and The New Business 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 (and more sharply than nominal GDP growth). The forward revenue estimates are also susceptible to changes in the extent of tax minimisation and avoidance action by taxpayers.
Total revenue is expected to:
- decrease in 2000-01 by 5.5 per cent from 1999-2000, due largely to the impact of measures associated with The New Tax System; and
- remain at around 23 per cent of GDP in the forward years.
Individuals tax falls in 2000-01 due to the introduction of lower personal income tax rates in that year. Other income tax rises sharply in 2000-01 before falling in 2001-02. This largely reflects the effective bring-forward of revenue that occurs with the introduction of the new PAYG Instalment arrangements for companies and superannuation funds in 2000-01.
Indirect tax falls sharply in 2000-01 as a result of the abolition of WST following the introduction of The New Tax System. The effect of this abolition is partially offset by the Commonwealth's retention, from 1 July 2000, of indirect taxes previously collected on an agency basis for the States (see Footnote 4 on page 5-7).
Non-tax revenue is expected to:
- decrease from 2000-01 to 2001-02, largely due to lower expected net gains from the sale of non-financial assets in 2001-02; and
- increase in 2002-03 and 2003-04 as the result of increased interest earned on investment activities and swap transactions undertaken by the AOFM in the management of the Commonwealth's debt.
In 2002-03 and 2003-04, total revenue is expected to grow broadly in line with nominal GDP.