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 average error for forecasts of cash receipts has been 1.1 per cent, with the errors varying around this average by 2.7 percentage points.

There are not enough observations to assess the forecasting performance for accrual revenue. In the first half of the current decade, revenue has grown more strongly than forecast. The revenue forecasting methodology has been adjusted in recent years to align the revenue forecasts and projections more closely to recent experience.

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

Treasury

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.