Doubts on revenues from Labor's negative gearing and capital gains policy: AFR report
The Australian Financial Review says Labor's budget forecasts have been undermined by revelations that the Parliamentary Budget Office believes the impact of negative gearing and capital gains tax changes are uncertain enough to make revenue forecasts of low reliability.
Its correspondent Laura Tingle writes Labor is heavily relying on its negative gearing/capital gains tax package to shore up its medium term budget position by raising over $37 billion over the next decade.
The Parliamentary Budget Office was actually asked by the Coalition to model a negative gearing and capital gains policy similar to Labor's policy.
The PBO estimated the policy submitted by the Coalition would raise around $6 billion a year by 2026-27, about $800 million less than Labor's published figures, but with a similar trajectory of increasing revenue from 2019-20 onwards.
Around $2.5 billion of this annual revenue would come from capital gains tax and around $3.5 billion from the negative gearing measures.
Tingle writes it was the first time there has been a reliable breakdown of the split in anticipated revenue collections between the two tax measures, albeit with PBO reflection on the uncertainty over the likely revenues.
"The costing is considered to be of low reliability due to uncertainty surrounding behavioural responses, broader economic impacts and assumptions surrounding the growth in the components of net investment income and capital gains", the costings document says.
"This response does not account for the potential broader macroeconomic implications of this proposal. In addition, the reliability of the costing decreases the further into the future the estimates are projected", PBO says.
An internal briefing for the government noted capital gains tax is seven times more volatile than total tax revenue and 2.5 times more volatile than company tax revenue.
This year's budget papers noted that "forecasting CGT is very difficult".