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Part I: Overview
Revenue estimates for the period from 1999-2000 to 2003-04 are provided in Table 1.1 Relative to the 1999-2000 Mid-Year Economic and Fiscal Outlook (MYEFO), estimated total revenue has increased in each year of the forward estimates period.
Table 1: Summary of Commonwealth General Government Revenue(a)
(a) Tax revenue estimates from 2000-01 onwards are affected by the introduction of The New Tax System.
(b) As published in the 1999-2000 MYEFO. Includes the Diesel Fuel Rebate Scheme (DFRS) as an offset to revenue. All other estimates reflect the reclassification of the DFRS from an offset to revenue to an expense (around $1.6 billion in 1999-2000).
Over the period from 1999-2000 to 2003-04, total revenue as a percentage of GDP is expected to:
- decline from 26.8 per cent of GDP in 1999-2000 to 23.7 per cent in 2000-01 and to 22.8 per cent in 2001-02; and
- remain at around 23 per cent of GDP in 2002-03 and 2003-04.
The sizeable reduction in Commonwealth general government revenue in 2000-01 relative to 1999-2000 is due to the introduction of The New Tax System. This includes significant reductions in personal income tax and the abolition of the Wholesale Sales Tax (WST) from 1 July 2000. These changes are accompanied by a significant reduction in expenses, particularly the abolition of Financial Assistance Grants to the States and Territories, following the introduction of the Goods and Services Tax (GST, which is passed in full to the States).
Table 2 reconciles this Budget's revenue estimates with those at the time of the MYEFO and at the 1999-2000 Budget in terms of policy decisions, and economic parameter and other variations.
Table 2: Reconciliation of Revenue Estimates
(a) Includes the reclassification of the DFRS from an offset to revenue, to an expense.
Policy decisions since MYEFO reduce estimated revenue in the budget and forward years. However, this is more than offset by the effect of stronger forecast economic activity in 1999-2000 and 2000-01, and stronger taxation collections in 1999-2000 relative to expectations at MYEFO. Major revenue measures since MYEFO include:
- a decision not to proceed with the temporary Defence - East Timor levy, with an estimated cost to revenue of $900 million in 2000-01; and
- setting excise rates for beer on conservative assumptions so as to ensure the retail price of a carton of regular full strength beer need not increase by any more than 1.9 per cent, with an additional cost against the forward estimates of $460 million.
A full list of revenue measures introduced since the 1999-2000 Budget is provided in Appendix B to this Statement. In addition, all measures since MYEFO are described in full in Budget Paper No. 2 - Budget Measures 2000-01.
In 1999-2000, estimated revenue has been revised up by around $5½ billion since MYEFO. This is driven principally by:
- stronger than anticipated company tax collections, lower than expected tax refunds for individuals, and the effect of higher world crude oil prices on Petroleum Resource Rent Tax (PRRT) collections;
- substantially higher than expected proceeds achieved from the March 2000 auction of telecommunications spectrum licences;2 and
- a reclassification of the Diesel Fuel Rebate Scheme (DFRS) from an offset to revenue to an expense. This reclassification increases revenue by around $1½ billion in 1999-2000 with an equivalent increase in expenses.
In 2000-01, estimated revenue has been revised upwards by almost $5 billion since MYEFO. The major factors contributing to this overall increase are:
- a $2 billion increase in total revenue arising from the reclassification of the DFRS;
- a positive revision to expected PRRT revenue of around $½ billion due to higher world crude oil prices and domestic oil production relative to expectations at MYEFO;
- the effect of weaker than expected payments of taxation refunds in 1999-2000 flowing through to 2000-01; and
- a substantial increase in the anticipated net gain from the sale of telecommunications spectrum licences in 2000-01, 3 partly offset by lower dividend revenue.
A further influence on the higher revenue estimates in 2000-01 and the forward years is a re-evaluation of the expected distribution of the Family Tax Benefit (FTB) package between revenue and expenses. Recent survey data suggest that more families than previously expected will claim the FTB as a cash payment rather than through the taxation system. As a result, estimated taxation revenue has been revised upwards by almost $1 billion in 2000-01 and more than $½ billion in the forward years. These increases in revenue are accompanied by increases in expenses.
The positive revisions to total revenue since MYEFO in the forward years (2001-02 to 2002-03) largely reflect the reclassification of the DFRS and revisions to the expected distribution of FTB payments between revenue and expenses (noted above).
1 Unless otherwise specified, all estimates in this Statement are on an Australian Accounting Standard (AAS31) consistent basis.
2 Consistent with Australian accounting standards, a net gain from the sale of telecommunications spectrum licences is reported as revenue. In particular, the $1.3 billion received from the March 2000 auction of telecommunications spectrum licences was greater than anticipated at MYEFO.
3 The Australian Communications Authority has scheduled several major auctions of telecommunications spectrum licences in 2000-01. This includes an auction of spectrum licences to be used for so-called `third-generation' mobile communications applications.