Parliamentary Budget Office costings requested by the Coalition suggest Labor’s negative gearing and capital gains tax changes may raise less revenue than expected.
Labor has also refused to reveal how reliable the PBO rates its revenue estimates for the party’s negative gearing and capital gains tax policies.
It comes after a report in the Australian Financial Review revealed that PBO costings for the Coalition on similar policies were of “low reliability”.
According to the report, the Coalition asked the PBO to model negative gearing and capital gains policies similar in all respects to Labor’s policy, except starting a year later and including the removal of the temporary budget repair levy in 2017.
It said the PBO estimated the policy would raise a total of $6bn a year by 2026-27, $2.5bn from capital gains tax changes and $3.5bn from negative gearing changes.
That $6bn is just $800m a year less than the PBO costings of Labor’s policies, reinforcing the fact the assumptions of both are similar.
But the PBO warned the costing is of “low reliability due to uncertainty surrounding behavioural responses, broader economic impacts and assumptions surrounding the growth in the components of net investment income and capital gains”.
The reference to “behavioural responses” acknowledges that investors may choose to invest differently to avoid higher capital gains tax.
It draws into doubt the estimate that the two measures will raise $37bn over a decade, impacting Labor’s claim it will return to surplus in four years and deliver larger or more sustainable surpluses after 2020.
On Radio National on Wednesday, Fran Kelly asked the opposition leader, Bill Shorten, about the PBO’s estimate that capital gains tax receipts are seven times more volatile than total tax revenue, and 2.5 times more volatile than company tax revenue.
Shorten said that Labor had not just relied on the PBO costings, but “also belt and braced the propositions we’ve advanced”.
“We got our independent costings panel – Bob Officer who was chair of John Howard’s commission of audit, Mike Keating and James McKenzie – and they’ve made it clear that our costings are just as reliable as the governments,” he said.
Shorten said “the reliability rating doesn’t affect the quality of the policy proposal”.
He refused to release the PBO reliability ratings for Labor’s capital gains and negative gearing policies, citing the fact the government did not release reliability ratings of its policies.
“It’s not surprising the government is attacking us but fair is fair. They don’t release their [reliability ratings].
“The government is making 10-year projections on their corporate tax cuts to big corporate Australia. I think that our process is absolutely as methodically sound as the government’s.
“We have taken our policies to the PBO, who are highly respected, and then had that costings panel give a second stress test to what we are saying.”
In a letter assessing Labor’s medium-term projections, released on Sunday, its independent costing panel said estimates “are subject to the same degree of uncertainty” as estimates in the budget, prepared by the PBO, treasury or the finance departments.
“We note that more than half of the costings have capped funding and therefore present a high degree of certainty,” it said.
“Where assumptions have been made around potential behavioural responses, we have relied upon the assessments of the PBO.”
The finance minister, Mathias Cormann, said “what has become apparent is that Labor’s costings are of a low reliability”.
“For example, when it comes to their tax measures, these costings do not include an assessment of relevant economic implications and the like.
“What we know is that Labor will deliver bigger deficits ... Labor will deliver higher taxes, and that would be bad for the economy and jobs.”
Cormann said the government was “very confident” about the reliability of its costings, including an extra $2bn over the next four years it claimed on Tuesday it would raise from cracking down on welfare and pension recipients.
“[Our costings] are put together consistent with the charter of budget honesty by treasury or finance, as appropriate.”
