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Statement 5: Revenue

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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.

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

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

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.

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