Fiscal risks — revenue

The Government’s revenue and policy measure forecasts, like all forecasts, are subject to a margin of error.

Over the past 20 years, the errors associated with the forecasts of cash receipts have not been significantly different from zero and there has been no bias towards either understatement or overstatement. Over this period, the average error was 0.6 per cent, with the errors varying around this average by 2.7 percentage points. There are not enough data to assess the forecasting performance for accrual revenue.

However, in recent years revenue has grown more strongly than forecast. The revenue forecasting methodology has been adjusted from this Budget to align the revenue forecasts and projections more closely to recent experience (see Box 1, Statement 5).

While many of the forecasts are reported to the nearest million dollars for budget accounting purposes, they should not be interpreted as implying an equivalent level of forecast precision.

The general and specific risks influencing the accuracy of the revenue forecasts are outlined below.

General risks

The estimates and projections of revenue are subject to a number of general pressures that can affect taxation collections. These general pressures include tax avoidance, developments in communications technology and workplace arrangements, court decisions and Australian Taxation Office rulings. These pressures may result in a shift in the composition of taxation collected from the various tax bases and/or a change in the size of the tax base. The revenue forecasts include an appropriate allowance for these factors, given the data available.

Specific risks

Renegotiation of withholding tax rates in certain Australian double tax treaties

The Australian Government is renegotiating its double tax treaties with several countries. Depending on the negotiated outcomes, changes to these treaties could have positive or negative revenue effects.

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