Appendix C: Statement of risks
Overview
Full details of fiscal risks and contingent liabilities are provided in Budget Paper No. 1, Budget Strategy and Outlook 2010‑11. The following statement updates (where necessary) those fiscal risks and contingent liabilities that have changed since the 2010‑11 Budget.
The forward estimates of revenue and expense in the Mid-Year Economic and Fiscal Outlook 2010‑11 (MYEFO) incorporate assumptions and judgements based on information available at the time of publication and are based on a range of economic assumptions and other forecasts and projections.
The estimates and projections of revenue are subject to a number of general risks that can affect taxation collections. These general pressures include tax avoidance, 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 reflect the latest economic outlook. To the extent that the outlook changes over time so too will the revenue forecasts. Accordingly, risks identified in the economic outlook will translate through to risks to the revenue forecasts. Large exchange rate movements and the continuing uncertainty in global financial markets mean that the risks to the fiscal outlook remain elevated.
Major taxes such as company and personal tax fluctuate significantly with economic activity. Capital gains tax is particularly volatile and is affected by both the level of gains in asset markets and the timing of when those gains are realised. Resource rent taxes can be expected to move with commodity prices.
The Pre-Election and Fiscal Outlook 2010 (PEFO) contained information on fiscal risks associated with the National Broadband Network. These risks are unchanged since that time.
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