EXEMPTING agriculture and deforestation from the carbon tax will cost $3.5 billion per year when the system is up and running according to a new Treasury analysis released as part of the Charter of Budget Honesty.
The so-called Tax Expenditures statement attempts to quantify the tax income lost as a result of concessions, on the basis that concessions often achieve the same effect as direct spending with the same impact on the budget balance.
But they are hard to measure with certainty. Treasury says for some there simply isn't enough data to guess at how much tax would be paid without the concession. For others a mathematical calculation of the tax that would be collected without the concession will overstate its cost because without the concession people will change their behaviour to avoid the tax.
The biggest tax concessions are the $35.5 billion Capital Gains Tax exemption for the family home, superannuation tax concessions totalling $30.2 billion, the $5.9 billion goods and services tax exemption for food and the $4.7 billion 50 per cent tax discount on money made from capital gains.
Treasury says growth in the value of tax concessions has slowed over the past two years because of the impact of the global financial crisis on superannuation returns.
This year the government changed and made less generous the formula used to calculate the value of motor vehicle fringe benefits. Worth an estimated $1.2 billion in 2011-12, the concession will cost just half of that by 2014-15.
"The new formula should put an end to driving to get up miles," said Australian Conservation Foundation strategic director, Charles Berger.
The first estimates for the carbon tax show by 2014-15 the exemption for agricultural emissions will cost $2.2 billion per year, the exemption for deforestation will cost $1.3 billion, and the exemption for decommissioned mines will cost $30 million.
TOP 10 TAX EXEMPTIONS
$35.5 billion Capital gains tax for the family home
$30.2 billion Superannuation tax concessions
$5.9 billion GST exemption for food
$4.7 billion Capital gains tax50%discount
$3.8 billion GST financial services concessions
$3 billion GST exemption for health
$2.9 billion GST exemption for education
$2 billion Family Tax benefit exemption
$1.3 billion Private health insurance rebate
$1.3 billion Tax exemption for charities
2011-12 estimates Source: Commonwealth Treasury, Tax Expenditures Statement