Sent: 02-02-2010 13:29:03
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Tax Expenditures & IGR No. 3
Last week the Commonwealth Treasury released its 2009 Tax Expenditures Statement.
The first one of these was released in 2003 and since then they've become an annual event.
Tax expenditures are items that provide concessions, benefits or incentives via the tax systems. Total tax expenditures for 2008/09 are worth approximately $108b.
In the 2008/09 year, superannuation cost $24.4b in tax concessions. This is a 150% increase from the 2001/02 year when it cost about $9.7b.
In the last full financial year before Costello introduced his Better Super reforms, super was going to cost $23.2b.
By way of comparison, the tax expenditures on the family home if the interest cost and other costs are deductible and the 50% CGT discount was available is estimated to be worth $19b in 2008/09.
In 2003 the TES ran to 124 pages including an index. The current edition runs to 255 pages ... an almost 100% increase.
Released yesterday, as you've no doubt heard, was the latest Intergenerational Report. As always this document makes interesting reading.
There is no change to the basic premise that the long-term numbers simply do not add up. The planned expenditures in health, aged care and aged pension trumps the ability of the government to raise sufficient revenue to fund this expenditure.
The large unsustainable budget deficits do seem to be getting smaller compared to the two previous IGRs released in 2002 and 2007.
A few weeks ago, Mr Henry, Secretary to the Commonwealth Treasury made the obvious comment that if the community wanted the government to spend so much money then we would have to accept higher taxes. His boss, the Federal Treasurer, didn't react too well to his comments.
It's good to remember T.S. Eliot's famous line which I've quoted before - "Most people can't stand too much reality".
Interestingly despite the modest increases in the minimum aged pension age, the Treasury has elected not to assume that there will be a significant increase in the participation rate (that is the percentage of the population employed) for older workers.
It seems reasonable to conclude that the latest IGR was written in a way that attempts to help the Government sell its Carbon Pollution Reduction Scheme. Will the Government's CPRS agenda continue as is and as assumed in the IGR or will it be amended in some way? If it does get amended the reasonably large parts of the IGR will have a very short shelf life.
Perhaps the Government thought that its ability to sell the CPRS would be enhanced by the 'independent' Department of Treasury analysis. They may be right but I think everyone knows that the IGR is a political document.
Finally please consider purchasing a copy of my comprehensive guide to SMSFs. You can look at the contents page at the following link: http://www.atcbiz.com.au/smsfbooktoc.pdf
Two options are available - once only subscription - $55 inc GST - or an annual subscription will gives you access to all the updates made throughout the year ($120 inc GST).
The book can be purchased at the following link: http://www.atcbiz.com.au/smsfstore.php
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