5.3 Consumption Tax Revenue Growth
Figures 12 and 13 show the growth of GST revenues for females and males respectively, for each of the cases discussed earlier. The projections for income tax and GST combined, and for males and females combined, are shown in Figure 14. The effect of pure ageing and labour force effects are shown for both taxes combined in Figure 15. By the year 2061, the projections show that the effect of ageing alone (constant participation ratios) is to reduce the total tax revenue by 2.4 per cent compared with the base model. The effect of projected labour force participation changes (with a constant age distribution) is to increase total revenue above the base model by 5.7 per cent. While these are by no means trivial differences, they are small in comparison with the effects of changes in wage growth or the use of different threshold indexation rules. One reason why the ‘pure ageing’ projection of GST revenue is below that of the base model is that the latter has no indexation of income tax thresholds. This means that disposable incomes are lower than otherwise and hence that GST revenue is lower. In fact further results show that when the income tax thresholds are fully indexed for wage growth, and income tax revenue is correspondingly lower, the GST revenue from ‘pure ageing’ is actually higher than in the base model with indexation.
- Figure 12: Growth of GST Revenue for Alternative Scenarios: Females
- Figure 13: Growth of GST Revenue for Alternative Scenarios: Males
- Figure 14: Income and GST Growth: Males and Females Combined
- Figure 15: Effects of Ageing and Labour Force Participation: Male and Female and All Taxes Combined
