Preparation of the Tax Expenditures Statement
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The objective of the audit was to assess the extent to which the Department of the Treasury and the Australian Taxation Office (ATO) have improved the management of tax expenditure estimates by implementing the six recommendations in the 2008 ANAO audit and the three recommendations made by the Joint Committee of Public Accounts and Audit (JCPAA) following its inquiry.
1. Tax expenditures are, broadly, tax concessions that fall outside a tax norm or benchmark.1 They can include tax: exemptions (amounts excluded from the tax base); deferrals (delays in paying tax); deductions (which reduce total assessable income); or offsets (which directly reduce the amount of tax payable). Tax expenditures are used by governments to promote particular policy objectives and provide an alternative mechanism to direct expenditures.2 As such, they have an effect on the Budget position like that of direct expenditures. Alternatively, they may be viewed as opportunity costs, which impact revenues that if collected would be available to fund other government policies and/or improve the Government’s Budget position.
2. Reporting of tax expenditures is required under the Charter of Budget Honesty Act 1998 (Charter of Budget Honesty). The Department of the Treasury (the Treasury) commenced the annual publication of a separate Tax Expenditures Statement (TES) in 1987, and has prepared a statement for each year (except for 1999–2000) up to and including 2012. The TES contains details of each of the tax expenditure items, and where possible reports the estimated value or order of magnitude of the benefit to taxpayers over an eight-year period, as well as the reliability of the estimate.
3. The TES includes both new and modified tax expenditures. New tax expenditures arise from measures that were announced since the previous TES up to the date of the most recent Mid‑Year Economic and Fiscal Outlook, and items recently identified as tax expenditures. Modified tax expenditures refer to existing tax expenditures that have changed materially, for example because of a change to the benchmark, a decision to remove a tax expenditure in a certain year, an amalgamation or split of tax expenditures, or the inclusion of a new element to an existing tax expenditure. The annual TES gives Parliament and the general public the opportunity to examine existing tax expenditures.
4. In 2011–12, Commonwealth tax expenditures were estimated at $111 billion, or around 7.6 per cent of GDP.3 Taxation revenue reported by the Australian Government in 2012 amounted to $316.5 billion.4 The number of tax expenditure items has increased in recent years, from 272 in TES 2006, to 364 in TES 2011 and to 363 in TES 2012. The largest measured tax expenditure items in TES 2012 related to the: concessional taxation of superannuation (two items together estimated at $30.3 billion); concessional capital gains tax treatment of owner-occupied housing (two items together estimated to provide a benefit to taxpayers of $30.0 billion); and the Goods and Services Tax exemption on food items prepared and/or consumed at home (estimated at $6.2 billion).5
5. The Treasury stated in TES 2012 that the statement is an integral component of the Australian Government’s Budget reporting, and serves three key functions:
to allow tax expenditures to receive a similar degree of scrutiny as direct expenditures; to allow for a more comprehensive assessment of government activity; and to contribute to the design of the tax system, by promoting and informing public debate on all elements of the tax system.6
Previous reviews of Commonwealth tax expenditures
6. In May 2008, ANAO tabled an audit of the Preparation of the Tax Expenditures Statement.7 The objective of this audit was to assess the completeness and reliability of the estimates reported in TES 2006. Consistent with a suggestion of the Senate Standing Committee on Finance and Public Administration’s March 2007 report (Transparency and accountability of Commonwealth public funding and expenditure)8, the ANAO audit also examined opportunities for greater transparency in the reporting of tax expenditures.
7. The 2008 audit report concluded that: the Treasury had not yet found a way to integrate the reporting of outlays and tax expenditures; tax expenditures had not been treated consistently with outlays within Budget processes; and the measurement, monitoring and reporting of tax expenditures through the TES could be improved. Against this background, the audit commented that the ongoing review of tax expenditures would be beneficial.9 The audit made six recommendations (outlined in Appendix 2) directed at improving the quality of information relating to tax expenditures over time through regular review and evaluation of tax expenditure items, and improvements to the data and reliability of the models used to quantify tax expenditures. The recommendations were agreed, or agreed with qualification—by the Treasury for each recommendation, and by the ATO in response to two recommendations.10
8. The Joint Committee of Public Accounts and Audit (JCPAA) conducted an inquiry into the above-mentioned audit in September 2008, and released its report in June 2009.11 The JCPAA report made three recommendations (outlined in Appendix 3), aimed at enhancing the Treasury’s reporting of tax expenditures in the annual TES, including through: the publication of revenue gain estimates; investigating other models of reporting; and including information in the Budget Papers on the extent to which tax expenditure reporting had improved through the receipt of reliable data from other agencies. The Treasury’s response to the Chair of the Committee in December 2009 indicated it had implemented two of these recommendations and had taken steps towards implementing the third.
9. Other Australian Government inquiries have also commented on the tax expenditure reporting and management framework. Specifically, the review by the then Senator Andrew Murray in June 200812, as part of Operation Sunlight reforms13, encouraged the Government to adopt and implement the recommendations of the 2008 ANAO audit of tax expenditures. In addition, the review of Australia’s Future Tax System14 in December 2009, which considered how Australia can best structure its tax and transfer system into the future, made four recommendations relating to the tax expenditures framework. These covered the treatment of tax expenditures in the Budget, the need for amendment of the Charter of Budget Honesty, the development of reporting standards for tax expenditures and state government reporting of tax expenditures.
Audit objective and scope
10. The objective of this audit was to assess the extent to which the Treasury and the ATO have improved the management of tax expenditure estimates by implementing the six recommendations in the 2008 ANAO audit and the three recommendations made by the JCPAA following its inquiry.15
11. The audit examines developments from May 2008, when the original audit tabled, to the release of TES 2011, in January 2012.16 The audit mainly focuses on the Treasury, which has primary responsibility for preparing Budget documentation on tax expenditure estimates and coordinating the publication of the TES. The ATO was also included in the audit because of its role in developing the tax expenditure models, and a number of the 2008 audit recommendations involved the ATO.
12. Tax expenditures are revenues a government forgoes in pursuit of its policy objectives, including its medium-term fiscal strategy. Tax expenditures have been an important part of the Australian income tax system since the early 1900’s, when tax exempt invalid and old age pensions were introduced.17 In some areas, such as the retirement income system, they are heavily integrated into the Government’s policy framework.18 The number and aggregate value of tax expenditures have increased substantially over time and were estimated in 2011–12 to be around $111 billion. This represents a significant level when viewed in the context of the Australian Government Budget.
13. The ANAO’s 2008 audit and subsequent JCPAA review19 encouraged improvements to the administration of tax expenditures through better integration of tax expenditures into the Budget process, systematic review to ensure that tax expenditure items continue to meet their intended objectives and improved reporting in the annual TES.20 Progress by the Treasury and the ATO in implementing the recommendations in the 2008 audit and JCPAA review has been slow. Treasury advised that, facing reduced resourcing, it has focussed on providing advice on the Government’s key revenue priorities, as well as servicing the review of Australia’s future tax system and other key reviews.
14. Of the recommendations in the 2008 audit and JCPAA review, only two ANAO recommendations have been fully implemented.21 The remaining recommendations, which continue to be relevant, have only been partially addressed. The status of the recommendations that have not been fully implemented is as follows:
- processes have been put in place to better integrate tax expenditures into the Budget process, although there is the potential to increase the quantification of tax expenditures resulting from new policy proposals in the relevant Budget Papers (relating to ANAO Recommendation No. 2);
- the systematic review and evaluation of tax expenditures on an ongoing basis commenced in 2008 but ceased in 2011, without publicly reporting the results (relating to ANAO Recommendation No. 1);
- the Treasury has not advanced the development of standards or pursued international methods of reporting (relating to ANAO Recommendation No. 3 and JCPAA Recommendation No. 8); and
- there has been no measurable improvement to the reliability and quantification of the Treasury’s tax expenditure estimates over time (relating to ANAO Recommendation No. 6(a) and 6(c), and JCPAA Recommendation No. 9).
15. Changes to Budget operating rules have been made to assist the integration of tax expenditures into the Budget process.22 Since September 2009, the Expenditure Review Committee of Cabinet (ERC) is the only committee that can formally recommend any new spending or tax expenditure proposals to Cabinet23, unless the Prime Minister agrees otherwise. This change promotes greater scrutiny of tax expenditures, by assisting in integrating the consideration of revenue measures, outlays and tax expenditures in the annual Budget process. However, in practice, there are a number of arrangements in place for considering and approving tax expenditures relating to new policy proposals in the Budget process.
16. For TES 2011, 24 of the 45 tax expenditure items associated with new policy proposals were considered by the ERC. The other items were considered through: correspondence (such as between the Prime Minister and Treasurer), or by the Cabinet (and not the ERC); and are often associated with a broader package of Government revenue measures, or revenue and expense measures. These arrangements reflect the nature of government, where there will be times when matters are considered outside the normal committee processes of Cabinet. However, extensive use of such arrangements can detract from the goal of achieving better integration of tax expenditures in the Budget process. Further, the capacity for meaningful scrutiny in the Budget process is diminished when estimates of the value of tax expenditures are not provided. Of the 45 tax expenditure items resulting from new policy proposals in TES 2011, only 23 were explicitly quantified in the relevant Budget Papers.
17. Unlike government outlays, once introduced, tax expenditures are not subject to ongoing Parliamentary scrutiny through appropriation bills. Therefore, it is important that other government processes are in place to assess whether tax expenditure items have been achieving their policy objectives, and to compare the estimated and actual uptake of the measure. The Treasury commenced systematically reviewing tax expenditures in September 2008. However, these reviews ceased in early 2011, with only 31 per cent of the tax expenditure items in TES 2011 being reviewed. No further separate tax expenditure reviews have been undertaken, although some analysis has been conducted of tax expenditures as part of various Budget savings measures.24 Re-establishing a priority-based program of tax expenditure reviews would enable the Treasury to more fully inform the Government of the costs associated with individual tax expenditures and whether they are meeting their intended policy aims.
18. In the absence of the ongoing review of tax expenditures, the annual reporting of tax expenditure items through the TES is the primary means by which the existence and level of tax expenditures is monitored. However, the reliability of tax expenditure estimates remains an ongoing issue. Since TES 2008, the Treasury has disclosed information on the reliability of individual tax expenditure estimates in the annual TES. Successive statements have demonstrated that the arrangements introduced to improve the reliability of published tax expenditure estimates have not resulted in any significant improvements to the reported reliability ratings over time.25 More importantly, the Treasury has not developed a formal approach to improve the overall reliability of tax expenditure estimates, as recommended by the 2008 audit. A significant portion of tax expenditures also remain unquantified (32 per cent in both TES 2006 and TES 2011).
19. The 2008 audit noted that there had been a number of Government and Parliamentary reviews of tax expenditures over the last 35 years, each identifying similar shortcomings and making similar recommendations, yet few of these recommendations have been adopted.26 Similarly, this audit has found that the majority of the ANAO’s 2008 audit recommendations, and the recommendations from the associated JCPAA review, have not been implemented. These recommendations continue to be relevant, particularly if there is to be confidence in the public reporting of tax expenditures. In addition, the ANAO has made a further recommendation to improve the consistency of the published reliability ratings by standardising the methodology for allocating ratings.
Key findings by chapter
Budget integration and reporting (Chapter 2)
20. New revenue and expense measures generally affect the Budget deficit or surplus in the Budget year and/or the forward estimates. New revenue measures may also directly affect the level of tax expenditures by increasing or decreasing tax concessions. Because of the potential impact on the Budget of new policy measures involving tax expenditures, it is desirable that such measures are evaluated early on, in a similar manner to outlay measures, and are reported against objective standards to maximise transparency about their fiscal impacts.
21. In recent years, changes to Budget processes have encouraged the better integration of the consideration of outlays and tax expenditures in the annual Budget process.27 Specifically, the Budget operating rules envisage that ERC is the only Cabinet Committee that can recommend any new spending or tax expenditures proposals to the Cabinet, unless the Prime Minister agrees otherwise. ANAO found that 21 of the 45 tax expenditure items resulting from new policy proposals reported in TES 2011 did not involve ERC consideration. Many of these new and modified tax expenditure items were associated with a broader package of Government revenue measures, or revenue and expense measures. While this approach potentially allows tax expenditures to be considered with related policy measures, extensive use of such arrangements (that do not involve the ERC) can detract from the goal of achieving better integration of tax expenditures in the Budget process. Integration would be further improved by including, wherever possible, the quantification of tax expenditure items resulting from new policy proposals in the relevant Budget Papers.28
22. The Murray review as part of Operation Sunlight and the review of Australia’s Future Tax System both supported the ANAO’s recommendation29 relating to the development of standards to govern the reporting of tax expenditures. However, this has not occurred, with the Treasury advising the ANAO in August 2012 (in line with its response to the 2008 audit) that the standards governing the calculation and publication of tax expenditures are the benchmarks published each year in the TES. However, benchmarks are arbitrary, and are therefore not a desirable standard to govern reporting. The Treasury also advised the JCPAA in December 2009, in relation to its recommendation that the Treasury further investigate the merits of the Canadian model of taxation expenditure reporting30, that the department had investigated the Canadian model, but, at that time, did not intend to move further in that direction.31
23. Unlike other areas of financial reporting, there are no external reporting standards to guide the reporting of tax expenditures. The development of standards that establish the basis for the identification and measurement of tax expenditures would provide a stronger conceptual underpinning to the TES, enhance the transparency and reliability of the statements and promote comparability between years. The development of standards would best be pursued by the Treasury with other jurisdictions in the interests of sharing both experience and resources.
Review of existing tax expenditures (Chapter 3)
24. The systematic review of tax expenditures highlights opportunities for improvements in modelling the impacts of tax expenditures as well as ensuring they are periodically evaluated and continue to align with Government policy objectives.
25. The Treasury agreed to the ANAO’s recommendation to develop an approach for the conduct of an ongoing prioritised review of tax expenditures, and commenced the formalised review process in September 2008, with the aim of completing all reviews by 2013. However, the reviews ceased in 2011. Treasury advised ANAO in April 2013 that it discontinued the formal review process due to the utility of the reviews relative to other priorities, particularly providing advice to the Government on its tax priorities.
26. In total, the Treasury conducted 123 tax expenditure reviews between November 2007 and early 2011.32 Of the 364 tax expenditures listed in TES 2011, only 113 (31 per cent) were reviewed as part of this process, representing $32 billion (or 29 per cent of estimated quantified total tax expenditures) in 2010–11. While a comprehensive methodology was devised for the reviews undertaken, it was not always applied. In light of these factors which have impaired progress, Recommendation No. 1(a) from the 2008 audit has not been fully addressed. The ANAO considers that there is still a strong case for conducting a priority-based program of reviews—to assess tax expenditures that are most significant or where other information suggests a review would be beneficial.
27. In addition, the timing and outcomes of the reviews of individual tax expenditures have not been made publicly available. As such, Recommendation No. 1(b) from the 2008 audit has also not been fully implemented. The release of this information would improve the transparency of the tax expenditure review process, although ANAO recognises that this would be a decision for government.
Quality of tax expenditure estimates (Chapter 4)
28. Tax expenditure estimates are based on often complex economic models. To run these models, the Treasury and the ATO need to draw on a variety of data sources and the accuracy and timeliness of data can vary.33 Consequently, tax expenditure estimates have differing degrees of reliability. In order to make reporting on tax expenditures as useful to readers as possible, a focus on improving the reliability of estimates over time is important. As well, consideration of behavioural impacts on estimates is desirable.
29. Since 2008, the Treasury has corresponded with a range of Australian Government agencies to obtain information on possible unidentified tax expenditures.34 However, only four additional items were identified through correspondence with relevant agencies. In contrast, the Treasury identified 38 items35 within its own portfolio from 2008 to 2011 that were not previously recognised as tax expenditures. These different results suggest there are potential benefits in the Treasury adopting a more active approach towards identifying new tax expenditures in other portfolios, including assisting in those instances where there may be some question as to whether the item was a tax.36
30. Similarly, there is little evidence that additional data collected from agencies by the ATO and the Treasury has significantly improved the reliability of the estimates.37 A more systematic approach to obtaining data, including reviewing non-Treasury portfolio data to identify possible tax expenditures, and identifying where a lack of data is reducing the reliability rating of an estimate, is required if the reliability of individual estimates within the TES is to be improved. The approach would potentially be aligned with a program of prioritised reviews of tax expenditure items.
31. The 2008 audit suggested that tax expenditure reporting could be improved through the introduction of significant revenue gain estimates. Revenue gain estimates seek to take into account behavioural changes among taxpayers, unlike the revenue forgone approach which is the standard methodology used to prepare estimates in the TES.38 The Treasury has included revenue gain estimates in their TES from 2008 onwards (meeting Recommendation No. 5 of the 2008 ANAO audit). However, the Treasury is some way from meeting the JCPAA’s recommendation that it publish information on the 20 largest tax expenditures using both the revenue forgone and revenue gain methods. Only 10 revenue gain estimates were published in TES 2011, all of which were among the 20 largest expenditure items. To satisfy the intent of the JCPAA recommendation39, the Treasury could include, in future TES publications, revenue gain estimates for the 20 largest items or the reasons why this approach was not adopted.
32. Since TES 2008, the Treasury has disclosed information on the reliability of individual tax expenditure estimates in the annual TES, addressing Recommendation No. 6(b) of the 2008 audit. However, there remain a number of areas for improvement in relation to the reliability of estimates, notably that the Treasury has not developed a formal, documented approach to prioritise improvements to reliability.40 Inconsistencies were also identified in the approach taken by analysts within the Treasury and the ATO to assigning reliability ratings to estimates. The rating categories originally developed as part of the 2008 ANAO audit, and subsequently adopted by the Treasury, have not been further developed into a standardised process for analysts to effectively rate the reliability of individual estimates.
Summary of agency responses
33. The Treasury provided the following summary response, with the formal response in Appendix 1:
The annual publication of the Tax Expenditures Statement (TES) continues to be regarded by the Treasury as an integral part of the Australian Government’s Budget reporting. It allows tax expenditures to receive a similar degree of public scrutiny as direct expenditures and contributes to public debate on the elements of the tax system. The Treasury welcomes scrutiny of the TES itself, including from the ANAO in this follow-up audit. The Treasury agrees with the report’s recommendation to take steps to standardise the allocation of reliability ratings of estimates published in the TES.
Improvements have been made in a number of areas of the TES since the 2007-08 audit and subsequent recommendations by the Joint Committee of Public Accounts and Audit (JCPAA). The Treasury is also committed to the ongoing improvement of the TES, including through the quantification of new and existing tax expenditures and improvement in the reliability of estimates, where this is cost effective. The Treasury will continue to pursue improvements in the TES through progressing recommendations made by the ANAO and JCPAA, with regard to the available resources and in the context of Government priorities.
Australian Taxation Office
34. The ATO provided the following summary response, with the formal response at Appendix 1:
The ATO agrees with the recommendation in the report, acknowledging as it does the inherent difficulties in the calculation of tax expenditures.
Despite these inherent difficulties, and the resourcing concerns mentioned by Treasury, the ATO and Treasury have made improvements in Tax Expenditures Statements since 2008. From the ATO’s point of view these improvements have included improvements to models used and the gathering of more data from other agencies.
There are other matters canvassed in this audit which is more appropriate for Treasury to comment on.
Recommendation No. 1
To improve the consistency of the reliability ratings disclosed in the Tax Expenditures Statement, ANAO recommends that the Department of the Treasury and the Australian Taxation Office review and standardise their internal methodology for allocating reliability ratings to tax expenditure items.
ATO response: Agreed Treasury response: Agreed
 ZL Swift, H Polackova Brixi, and C Valenduc, ‘Tax Expenditures: General Concept, Measurement, and Overview of Country Practices’, in H Polackova Brixi, C.M.A Valenduc, ZL Swift (eds.): Tax Expenditures-Shedding Light on Government Spending through the Tax System: Lessons from Developed and Transition Economies, The World Bank, Washington D.C., 2004, p. 3.
 Direct expenditures include for example, grants, or the purchase of goods and services by the government.
 Department of the Treasury, Tax Expenditures Statement 2012, p. vii.
 Consolidated Financial Statements for the year ended 30 June 2012, p. 35.
 In TES 2012, tax expenditures are ranked in size using 2012–13 estimates.
 Department of the Treasury, Tax Expenditures Statement 2012, p. 14.
 ANAO Audit Report No.32 2007–08, Preparation of the Tax Expenditures Statement.
 Senate Standing Committee on Finance and Public Administration, Transparency and accountability of Commonwealth public funding and expenditure, March 2007, p. 33.
 ANAO Audit Report No.32 2007–08, Preparation of the Tax Expenditures Statement, pp. 12–13.
 The ATO responded to Recommendation No’s 4(b) and 6(a), (b), (c) and (d).
 Joint Committee of Public Accounts and Audit, Report 414, Review of Auditor-General’s Reports tabled between August 2007 and August 2008, June 2009.
 Senator Andrew Murray, Review of Operation Sunlight: Overhauling Budgetary Transparency, June 2008.
 Operation Sunlight is the Government’s reform agenda to improve the openness and transparency of public sector budgetary and financial management and to promote good governance practices.
 Australia’s Future Tax System, Report to the Treasurer, December 2009.
 Joint Committee of Public Accounts and Audit, Report 414, Review of Auditor-General’s Reports tabled between August 2007 and August 2008, June 2009.
 TES 2011 is the focus of this audit report. However, TES 2012 was released in January 2013, after ANAO had completed its fieldwork and analysis, and the report includes some high-level information from TES 2012.
 K Sadiq, ‘Tax Expenditures as Part of Australia’s Retirement Income System: The Elevation from “Disguised” Expenditures to Architectural Pillars of the 21st Century’, in L Phillips, N Brooks and J Li. Tax Expenditures: State of the Art, Selected Proceedings of the Osgoode 2009 Conference, Canadian Tax Foundation, 2011, p. 13:3.
 ibid., p. 13:10.
 ANAO Audit Report No.32 2007–08, Preparation of the Tax Expenditures Statement and Joint Committee of Public Accounts and Audit, Report 414, Review of Auditor-General’s Reports tabled between August 2007 and August 2008, June 2009.
 ANAO’s findings were supported in Senator Andrew Murray’s June 2008 report Review of Operation Sunlight: Overhauling Budgetary Transparency. The review of Australia’s Future Tax System was also supportive of selected ANAO recommendations.
 These recommendations were ANAO Recommendations Nos 4 and 5. ANAO Recommendation No. 4 relates to promoting more comprehensive reporting of tax expenditures by liaising with Commonwealth entities to identify all entities that potentially administer tax expenditures, and developing arrangements to obtain relevant data from entities outside the Treasury portfolio. ANAO Recommendation No. 5 relates to reporting selected tax expenditures using the revenue gain method. This method measures how much revenue could increase if a particular tax concession was removed, seeking to account for the behavioural changes of taxpayers. The Treasury has partially met related JCPAA Recommendation No. 7, to include in the TES the 20 largest tax expenditures using both the revenue gain and revenue forgone methods. ANAO Recommendation No. 6(b), relating to the disclosure of reliability of tax expenditure estimates has also been implemented.
 These rules are endorsed by the Cabinet.
 The Budget operating rules for September 2009 also included the Strategic Priorities and Budget Committee but the rules for later Budgets did not reference the Strategic Priorities and Budget Committee.
 Savings measures are attempts by the Government to reduce a Budget deficit or increase a surplus by identifying areas where it can reduce expenditure or increase revenue.
 Of those estimates with a reliability rating in TES 2011, four per cent were rated high, and for TES 2012, three per cent were rated high.
 ANAO Audit Report No.32 2007–08, Preparation of the Tax Expenditures Statement, p. 14.
 This relates to Recommendation No. 2 of the 2008 audit.
 Of the 45 tax expenditure items resulting from new policy proposals in TES 2011, only 23 were explicitly quantified in the relevant Budget Papers.
 This relates to Recommendation No. 3 of the 2008 audit.
 The 2008 audit noted that Canada takes a broader approach to the reporting of tax expenditures, reporting measures that are unarguably tax expenditures along with a range of others that may or may not be so categorised.
 The Treasury advised ANAO in January 2013 that it is unable to provide any documentary evidence of its review of the Canadian model of tax expenditure reporting.
 These reviews include five tax expenditures that were reviewed twice.
 In this context, the Treasury has advised that in many cases a complete absence of data may make it almost impossible to estimate some tax expenditures, particularly where tax expenditures arise due to the exemption from tax of certain income or activities.
 These correspondence activities have been in line with Recommendation No. 4(a) of the 2008 ANAO audit. Further, in its report on the audit, the JCPAA recommended that the Treasury include information in the Budget Papers on the extent to which tax expenditure reporting has improved through the receipt of reliable data from other agencies.
 Twenty-two of these 38 tax expenditures related to GST items in TES 2008.
 The 2008 audit noted (p. 60) that in some cases, there may be competing views as to whether a revenue measure is a tax.
 This relates to Recommendation No. 4(b) of the 2008 audit.
 The different methodologies used to prepare tax expenditure estimates, including the revenue gain methodology, are discussed further at paragraphs 4.16 to 4.20.
 The Treasury advised the JCPAA in December 2009 that: ‘Estimates of six tax expenditures using the revenue gain approach were published in the 2008 TES…It should be noted that there remain practical difficulties in making revenue gain estimates including the information or assumptions needed for the behavioural responses of taxpayers to policy changes and the assumptions must be made regarding the policy specifications for removing each tax expenditures.’
 As set out at Recommendation No. 6(a) of the 2008 audit. In addition, the number of unquantified estimates as a percentage of total tax expenditure estimates has remained fairly stable since 2006 and there are a number of large estimates which featured in TES 2006 that have not yet been quantified. As such, Recommendation No. 6(c) of the 2008 audit has only been partially addressed.