APPENDIX ADJUSTED MEASURES OF GOVERNMENT REVENUE


ADJUSTED MEASURES OF GOVERNMENT REVENUE

The taxation revenue statistics presented in this release are in accordance with the Australian System of Government Finance Statistics (GFS). This system is outlined in the Australian System of Government Finance Statistics: Concepts, Sources and Methods (cat. no. 5514.0) which is consistent with the International Monetary Fund's Government Finance Statistics Manual 2001 (IMF GFSM2001).

The GFS framework reflects taxation revenue collected by each level of government. The purpose of this appendix is to consider an alternative presentation of revenue which takes into account the level of government at which revenue is used rather than simply collected. The analysis considers the flows, by way of current grants, that occur between the levels of government in Australia, and the impact that this has on revenue at each of these levels. Also considered is the effect of direct and indirect transfers to households on total revenue. To aid in the understanding of these flows, the following analytical measures of revenue have been derived. Users should note that these measures are not themselves part of the GFS framework.


Adjusted taxation revenue

Adjusted taxation revenue is equal to GFS taxation revenue collected by each level of government, plus current grants received from higher levels of government, less current grants paid to lower levels of government. This measure is designed to give a clearer indication of the levels of government at which taxation revenue is actually used or spent. The source for a significant amount of the current grants distributed between levels of government is taxation revenue, such as the GST. However, some of the revenue distributed may have come from a source other than taxation. Further, it should be noted that some of the current grants transferred from Commonwealth Government to the state and local governments are Specific Purpose Payments (SPPs). Unlike the GST-related grants, these payments are 'tied' to specific policy areas or programs as agreed between the two levels of government. Similar arrangements exist between state and local government. SPPs for current purposes are included with other current grants in deriving adjusted taxation revenue.


Adjusted total revenue

Adjusted total revenue is equal to adjusted taxation revenue plus all other non-taxation sources of revenue. Non-taxation revenue includes revenue from sales of goods and services, property income (interest, dividends, income tax equivalents, land rents and royalties), fines, capital transfers, and current transfers other than grants. Current grants are excluded from non-taxation revenue because these have already been taken into account in deriving adjusted taxation revenue.


Adjusted total revenue less transfers to households

An important role of government is the redistribution of income, by way of direct and indirect 'benefits', to individual households. These transfers can be deducted from adjusted total revenue to derive adjusted total revenue less transfers to households. Direct benefits are regular cash payments made to households by government without any requirement to provide goods and services in return (e.g. welfare payments). Indirect benefits are non-cash benefits and services provided by government to individual households (e.g. concessions for transport and utilities, medical and pharmaceutical benefits and natural disaster relief).

The three derived measures explained above are illustrated in the following diagram:

An analysis along similar lines was first published in Australian Economic Indicators, March 2006 (cat.no.1350.0), in a feature article entitled "Recent Taxation Revenue Trends in Australia". This article included information on the introduction of The New Tax System on 1 July 2000.


Adjusted taxation revenue

Table 1 shows the derivation of adjusted taxation revenue, for all three levels of government in Australia.

TABLE 1. ADJUSTED TAXATION REVENUE, by level of government, and as % of GDP(a)
	2002-03	2003-04	2004-05	2005-06	2006-07	2007-08
State	$m	$m	$m	$m	$m	$m
COMMONWEALTH
1. Taxation revenue collected(b)	194 827	209 560	229 131	245 223	261 988	285 672
As % of GDP	24.9	24.9	25.5	25.3	25.1	25.2
As % of total tax revenue	81.7	81.3	82.1	82.2	81.8	81.9
2. Current grants to state government(c)	51 058	53 801	57 560	61 394	63 874	69 483
3. Current grants to local government	274	351	305	81	56	89
4. Current grants to multi-jurisdictional sector(d)	4 426	4 788	4 839	5 556	5 589	7 347
5. Adjusted taxation revenue =1-2-3-4(e)	139 070	150 620	166 427	178 192	192 469	208 752
As % of GDP	17.8	17.9	18.5	18.4	18.4	18.4
As % of total tax revenue	58.3	58.5	59.7	59.8	60.1	59.8
STATE
1. Taxation revenue collected(b)	36 418	40 394	41 655	44 233	48 903	53 130
As % of GDP	4.7	4.8	4.6	4.6	4.7	4.7
As % of total tax revenue	15.3	15.7	14.9	14.8	15.3	15.2
2. Current grants from Commonwealth government	51 058	53 801	57 560	61 394	63 874	69 483
3. Current grants to local government	1 817	1 843	1 899	2 014	2 184	2 305
4. Current grants to multi-jurisdictional sector(d)	264	249	389	304	297	350
5. Adjusted taxation revenue =1+2-3-4(e)	85 394	92 103	96 927	103 309	110 295	119 958
As % of GDP	10.9	10.9	10.8	10.7	10.5	10.6
As % of total tax revenue	35.8	35.8	34.7	34.6	34.4	34.4
LOCAL
1. Taxation revenue collected(b)	7 224	7 671	8 183	8 710	9 386	10 116
As % of GDP	0.9	0.9	0.9	0.9	0.9	0.9
As % of total tax revenue	3.0	3.0	2.9	2.9	2.9	2.9
2. Current grants from Commonwealth government	274	351	305	81	56	89
3. Current grants from state government	1 817	1 843	1 899	2 014	2 184	2 305
4. Adjusted taxation revenue = 1+2+3(e)	9 315	9 865	10 386	10 805	11 626	12 510
As % of GDP	1.2	1.2	1.2	1.1	1.1	1.1
As % of total tax revenue	3.9	3.8	3.7	3.6	3.6	3.6
Gross Domestic Product	781 675	841 351	897 642	967 454	1 045 674	1 131 514
Total taxation revenue collected	238 469	257 625	278 969	298 166	320 277	348 918
As % of GDP	30.5	30.6	31.1	30.8	30.6	30.8
(a) As published in Australian National Accounts, December Quarter 2008 (cat no 5206.0), Expenditure on GDP, Current Prices: Annual.
(b) According to GFSM2001.
(c) Part of the Commonwealth Government grants paid to State Goverments are onpassed to Local Governments.
(d) The multi-jurisdictional sector contains units where jurisdiction is shared between two or more governments, or where classification of a unit to a jurisdiction is otherwise unclear. The main type of units currently falling into this category are the public universities.
(e) The sum of taxation revenue for all levels of government does not equal the sum of adjusted taxation revenue for all levels of government owing to grants paid to the multi-jurisdictional sector.

Adjusted total revenue, and adjusted total revenue less transfers to households

Table 2 below shows adjusted total revenue, and adjusted total revenue less transfers to households for all three levels of government.

TABLE 2. ADJUSTED TOTAL REVENUE, less transfers to households
	2002-03	2003-04	2004-05	2005-06	2006-07	2007-08
	$m	$m	$m	$m	$m	$m
COMMONWEALTH
1. Adjusted taxation revenue(a)	139 070	150 620	166 427	178 192	192 469	208 752
2. Non-taxation revenue(b)	11 958	12 474	12 864	15 563	15 990	17 619
3. Adjusted total revenue =1+2	151 027	163 094	179 291	193 755	208 460	226 371
As % of GDP	19.3	19.4	20.0	20.0	19.9	20.0
4. Direct benefits to households(c)	63 607	71 897	73 989	76 997	81 138	86 078
5. Indirect benefits to households(d)	17 765	19 590	22 164	22 789	24 972	27 443
6. Adjusted total revenue, less transfers to households =3-4-5	69 655	71 607	83 138	93 970	102 350	112 851
As % of GDP	8.9	8.5	9.3	9.7	9.8	10.0
STATE
1. Adjusted taxation revenue(a)	85 394	92 103	96 927	103 309	110 295	119 958
2. Non-taxation revenue, excluding current grants from Commonwealth government(b)	26 348	29 834	32 712	36 755	40 998	38 635
3. Adjusted total revenue = 1+2	111 742	121 938	129 639	140 064	151 294	158 593
As % of GDP	14.3	14.5	14.4	14.5	14.5	14.0
4. Direct benefits to households(c)	715	764	1 088	994	1 046	1 350
5. Indirect benefits to households(d)	2 049	2 020	1 944	1 921	1 948	2 003
6. Adjusted total revenue, less transfers to households = 3-4-5	108 977	119 154	126 607	137 148	148 300	155 240
As % of GDP	13.9	14.2	14.1	14.2	14.2	13.7
LOCAL
1. Adjusted taxation revenue(a)	9 315	9 865	10 386	10 805	11 626	12 510
2. Non-taxation revenue, excluding current grants from Commonwealth and state governments(b)	9 474	10 003	10 886	12 164	13 333	14 566
3. Adjusted total revenue = 1+2	18 789	19 867	21 273	22 970	24 960	27 076
As % of GDP	2.4	2.4	2.4	2.4	2.4	2.4
4. Direct and indirect benefits to households(e)	. .	. .	. .	. .	. .	. .
5. Adjusted total revenue, less transfers to households = 3-4	18 789	19 867	21 273	22 970	24 960	27 076
As % of GDP	2.4	2.4	2.4	2.4	2.4	2.4
. . not applicable
(a) Derived in Table 1.
(b) Non-taxation revenue includes revenue from sales of goods and services, interest income, other property income (such as dividends, income tax equivalents, land rents and royalties), fines, capital revenue, and all current revenue other than grants.
(c) Direct benefits to households are monetary transfers.
(d) Indirect benefits to households are transfers 'in-kind' via goods and services.
(e) Local government does not make transfers of this kind to households.

Commonwealth taxation revenues have increased for all four measures since 2002-03 (Graph 1). In 2007-08, the Commonwealth Government collected 81.9% of total taxation revenue across all levels of government. Commonwealth taxation revenue in 2007-08 was $285,672m, an increase of 9% from the previous year. 26.9% of Commonwealth taxation revenue was distributed to the state and local governments and the multi-jurisdictional sector in current grants in 2007-08, compared with 28.6% in 2002-03. When taxation revenue distributed by the Commonwealth Government to both state and local government by way of current grants is taken into account, the level of adjusted taxation revenue at the Commonwealth Government's disposal in 2007-08 was $208,752 million. This represents an 8.5% increase from the previous year.

Adjusted total revenue for the Commonwealth Government in 2007-08 was $226,371 million, up 8.6% from the previous year.

When direct and indirect transfers to households are taken into account, Commonwealth Government revenue falls to $112,851 million in 2007-08. This is largely because of the role performed by the Commonwealth Government in redistributing income through welfare payments. In 2007-08, 39.7% of taxation revenue collected by the Commonwealth Government was redistributed to households in the form of direct and indirect benefits, compared with 41.8% in 2002-03. The share of the Commonwealth Government's adjusted total revenue transferred to households as either direct or indirect benefits decreased from 53.9% in 2002-03 to 50.1% in 2007-08. Overall, the Commonwealth Government's adjusted total revenue less transfers to households grew by 10.3% in 2007-08.

As a proportion of GDP, Commonwealth adjusted total revenue less transfers to households has increased from 8.9% in 2002-03 to 10% in 2007-08.

State government taxation revenues have increased for all four measures since 2002-03 (Graph 2). In 2007-08, state governments collected 15.2% of total taxation revenue across all levels of government. State government taxation revenue in 2007-08 was $53,130m, an increase of 8.6% over the previous year. When grants paid by the Commonwealth Government to state government are taken into account, state government adjusted taxation revenue in 2007-08 is $119,958 million. This represents an 8.8% increase from the previous year. Adjusted taxation revenue at the state level of government was 34.4% of total taxation revenue in 2007-08, compared with 35.8% in 2002-03.

For the state governments, adjusted total revenue in 2007-08 was $158,593 million, an increase of 4.8%.

When direct and indirect transfers to households by state governments are taken into account, state government revenues fall to $155,240 in 2007-08, an increase of 4.7% on the previous year. The redistribution of grants to state governments plus the net impact of transfer payments result in state government adjusted total revenue less transfers to households ($155,240) exceeding the Commonwealth Government's adjusted total revenue less transfers to households ($112,851).

Adjusted total revenues less transfers to households decreased to 13.7% of GDP in 2007-08 compared to 13.9% in 2002-03.

Local government taxation revenues have increased for all three measures since 2002-03 (Graph 3). In 2007-08, local governments collected 2.9% of total taxation revenue across all levels of government. Taxation revenue collected was $10,116m in 2007-08, an increase of 7.8% from the previous year. In 2007-08 adjusted taxation revenue increased by 7.6% and adjusted total revenue for local government increased by 8.5%. Non-tax revenues as a share of adjusted tax revenue have been increasing for local government since 2002-03.