Equities downturn hits tax revenues

Michael D’Ascenzo

The Australian Taxation Office (ATO) has confirmed the dramatic downturn in equity markets has begun impacting Commonwealth revenues.

The Commissioner of Taxation, Michael D’Ascenzo, used an address in Melbourne this week to point to the issue saying Treasury had revised down expected tax receipts by $4.9 billion in the current financial year and by $12.2 billion in 2009-10. “These downward revisions to revenue are particularly the result of lower forecasts of capital gains tax due to recent dramatic falls in global equity markets,” he said. “The revisions also reflect the substantial negative impacts on company profits of the credit market turmoil, weaker global growth and, from 2009-10, falling terms of trade.”

D’Ascenzo said the ATO would need to be alert to the potential for new compliance risks across all market segments.

“In the current environment, it would be reasonable to expect an increase in losses and there will be temptation among some to use them inappropriately,” he said. “There is likely to be an increased number of debt cases and, depending on behavioural changes, there may be an increased risk of lower disclosure and reporting.

“This is somewhat of a two-sided coin for the ATO,” D’Ascenzo said. “On one side, we must be vigilant for abusive tax practices. On the other, we are committed to being empathetic to people facing genuine hardship.”