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. Similarly, superannuation fund income tax is affected by investment market returns. 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 related to the flexible price period may also vary owing to changes in the international 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. In particular, demand driven programs, which form the bulk of the government's payments and expenses, can fluctuate significantly with economic and social conditions. If changes to these conditions are not anticipated this can have major effects on payment and expense levels. For example, an expected increase in the number of unemployed in the population could lead to additional welfare related expenses. Fiscal risks also 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 to 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 throughout 2013‑14. Current estimates relate to 2013‑14 only and do not provide for extensions of currently approved operations beyond 2013‑14. 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 will make up to A$1 billion available to the Government of Indonesia in the form of a standby loan facility to help support its financial position, to be drawn down should Indonesia be unable to raise sufficient funds at reasonable interest rates on global capital markets in the event of increased global financial market volatility. Contributions to the standby loan facility will also be provided by the World Bank, the Asian Development Bank and the Government of Japan. This facility will be available to Indonesia when the loan agreement between the two countries is signed (expected to occur before the end of June 2013) up to 30 June 2014. A drawdown from the facility will be dependent on a request from the Indonesian Government and subject to certain criteria being met. Any funds provided will be repaid in full with interest.
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.
There are a significant number of measures which impact on the Budget aggregates that still remain subject to the legislative process. If legislation is not passed by Parliament as proposed, this may affect the estimates and projections of the Budget.
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