Statement 8: Statement of Risks (Continued)
Fiscal risks comprise general developments or specific events that may affect the fiscal outlook. Some developments or events raise the possibility of a fiscal impact. In other cases, the likelihood of a fiscal impact may be reasonably certain, but will not be included in the forward estimates because the timing or magnitude is not known.
Major taxes such as company and individuals' income taxes 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 may vary quite significantly, particularly with movements in commodity prices and the level of the Australian dollar. Revenue from carbon permit sales for the flexible price period may also vary owing to changes in the world price of carbon permits.
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, Australian Taxation Office rulings and the outcome of compliance programs. 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.
There are also a number of fiscal risks that may affect the expense estimates and projections. For example, major technological advances in medicines and medical practices may lead to changes to the Medicare Benefits Schedule and the Pharmaceutical Benefits Scheme. Other examples of fiscal risks include emergency foreign aid and potential natural disasters. Such occurrences have in the past resulted in unexpected increases in expenses and may do so again. Specific fiscal risks identified for the Budget and forward estimates are detailed below.
The estimates for the Department of Defence include the cost of major overseas operations of the Australian Defence Force in Afghanistan and the Middle East and the Solomon Islands for 2012‑13. They also include the cost of the Timor‑Leste operation for the period July to December 2012. The forward estimates of expenses do not provide for extensions of currently approved operations beyond 2012‑13. Such funding is considered on a year‑by‑year basis and is subject to future decisions of the Government. This is consistent with past practice.
The Australian Government has supported the Gold Coast's bid to host the 2018 Commonwealth Games through the provision of commitments in areas such as immigration, customs, work permits, taxation, security, protection of commercial rights, and communications and information technology. Costs and timing associated with implementing the commitments are not available at this time.
The Energy Security Council was established as part of the Clean Energy Future package to advise on support measures to address energy security risks. The Council assesses applications for financial assistance in the form of loans for generator owners who need to refinance their debt if finance on reasonable commercial terms is not otherwise available. The Council will also consider applications for loans or other assistance to address systemic risk to energy security in the event of financial distress on the part of an energy market participant. Factors relevant to the realisation of this risk include the circumstances of the generator owners and their ability to access finance from the commercial market.
The Social Security Amendment (Supporting Australian Victims of Terrorism Overseas) Bill 2011 was introduced into Parliament on 24 March 2011. If passed, this legislation would establish a framework for the provision of financial assistance for Australians who are injured overseas as a result of terrorist acts and for close family members of Australians who are killed overseas as a result of terrorist acts. The legislation would enable the Prime Minister to declare that a relevant overseas terrorist incident is one to which the scheme applies. As acts of terrorism are unpredictable, the cost of the scheme is unquantifiable.
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