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Deloitte Warns Of Widening Australian Budget Gap

by Mary Swire, Tax-News.com, Hong Kong

22 November 2016


Deloitte Access Economics has forecast that Australia's tax-take from individuals, indirect taxes, and "profit taxes" will fall below Government estimates over the next two years.

According to the latest Deloitte Access Economics Budget Monitor, wage and job growth will undershoot official forecasts, hitting the Government's income from personal taxes. It explained: "Wage growth lifts people into higher tax brackets. So any wage shortfall bites twice, because it also slows the bracket creep that accelerates the Pay As You Go [income tax] take. An underperformance on jobs hides an extra issue. As job growth has been concentrated among part-timers, it impact on the tax take is even more subdued than it seems."

"[Australia's] tax system is dominated by income taxes, and a slower-and-more-modest return to income growth means that we see this as a tougher economic backdrop for the performance of the tax take," the report stated.

As a result, Deloitte Access Economics expects the tax-take on individuals to fall short of the Government's Budget forecasts by AUD1.3bn (USD961.9m) in 2016-17 and by AUD2bn in 2017-18. In addition, it anticipates that indirect taxes will underperform by AUD0.5bn in 2017-18, with low inflation rates and shifts in the housing market to blame.

The report also cautioned against reliance on the notion that higher coal prices will boost the tax take. Deloitte Access Economics does not expect higher prices to last, and pointed out that "because many coal miners racked up losses in recent years, not all of their rebound into profit will show up as a higher tax take in 2016-17, or indeed 2017-18." It added that "the 'lowflation' world in which Australia is currently trapped takes its biggest toll on profits."

Deloitte Access Economics therefore forecasts that "profit taxes" will fall short of Budget forecasts by AUD0.3bn in 2016-17, and by AUD1.8bn in 2017-18.

TAGS: individuals | tax | value added tax (VAT) | budget | corporation tax | Australia | tax rates | inflation | individual income tax

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