Treasury, ATO must improve tax break estimates: A-G

AAP, with a staff reporter

Treasury and the Australian Tax Office (ATO) have been "slow" to fix the system they use to estimate more than $100 billion in tax breaks, the auditor-general says. 

In a report into the preparation of tax expenditure statements, Commonwealth auditor-general Ian McPhee said "there has been no measurable improvement to the reliability and quantification of the Treasury's tax expenditure estimates over time".

The report, released today, recommended the Treasury and ATO come up with better standards to identify and measure tax expenditures.

In 2011/12, the 363 tax expenditure items in the budget totalled $111 billion out of the government's total tax revenue of $316.5 billion.

Tax expenditures are federal budget items such as tax breaks for superannuation and owner-occupied housing and the GST exemption on food.

The superannuation and capital gains tax breaks alone totalled $60 billion.

Mr McPhee said one of the problems was that the government's powerful expenditure review committee of cabinet (ERC) had only considered 24 of 45 new tax expenditure items in 2011.

Other items had been dealt with through correspondence between the prime minister and treasurer or through consideration by the cabinet.

The auditor-general said because of this only 23 tax expenditure items had been "explicitly quantified in the relevant budget papers".

Treasury said in its response that it would "continue to pursue improvements", including the reliability of its estimates.

The ATO said there were "inherent difficulties" in calculating tax expenditures but improvements were being made.

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Just like the RBA the Treasury is full of boffins that are incapable of carrying out their function correctly. Whilst I am sure the same applies to the ARO there is no doubt that Treasury is blaming the ATO for all its poor forecasts over many years. A bit like the pot calling the kettle black. One of the most critical things for Abbott to do is to clean out these three activities otherwise he will not know where the economy is and how much damage the socialist Labor and Greens Government has done.