Australian Tax Policy Analysis

Utilities to cost and evaluate Australian tax policy, including fast projections of personal income tax collections, high-performance tax and transfer calculators, and an interface to common indices from the Australian Bureau of Statistics. Written to support Grattan Institute's Australian Perspectives program, and related projects. Access to the Australian Taxation Office's sample files of personal income tax returns is assumed.

grattan

Utilities for costing and evaluating Australian tax policy, including high-performance tax and transfer calculators, a fast method of projecting tax collections from ATO sample files, and an interface to common indices from the Australian Bureau of Statistics. Written to support Grattan Institute’s Australian Perspectives program.

Overview

install.packages("grattan")

library(grattan)

income_tax

Calculates the income tax for a given taxable income and financial year:

income_tax(50e3, "2015-16")

## [1] 8547

With sample files

income_tax is designed to work well with the ATO’s sample files. You can obtain the sample files from my repo:

# install.packages("taxstats", repos = "https://hughparsonage.github.io/tax-drat")
library(taxstats)

library(hutils)
library(data.table) 
library(magrittr)
library(ggplot2)

Simply pass the sample file to .dots.ATO and the complexities of things like Medicare levy and the Seniors and Pensioners Tax Offset are handled for you. For example:

s1314 <- as.data.table(sample_file_1314)
s1314 %>%
  .[, tax := income_tax(Taxable_Income, "2013-14", .dots.ATO = s1314)] %>%
  .[, .(Taxable_Income, tax)]

##         Taxable_Income       tax
##      1:           4800     0.000
##      2:         126122 36503.970
##      3:          39742  4655.410
##      4:         108123 29574.355
##      5:          85957 21040.445
##     ---                         
## 258770:          24462  1111.710
## 258771:          37055  3701.525
## 258772:          45024  6530.520
## 258773:           5134     0.000
## 258774:          46368  7007.640

model_income_tax: modelling changes to personal income tax

While income_tax is designed to inflexibly return the tax payable as legislated, model_income_tax is designed to calculate income tax when changes are made. For example,

s1314 %>%
  # reduce top threshold from 180,000 to 150,000
  model_income_tax(ordinary_tax_thresholds = c(0, 18200, 37000, 80000, 
                                               150e3), 
                   baseline_fy = "2013-14") %>%
  .[, .(Taxable_Income, baseline_tax, new_tax)]

##         Taxable_Income baseline_tax   new_tax
##      1:           4800        0.000     0.000
##      2:         126122    36503.970 36503.970
##      3:          39742     4655.410  4655.410
##      4:         108123    29574.355 29574.355
##      5:          85957    21040.445 21040.445
##     ---                                      
## 258770:          24462     1111.710  1111.710
## 258771:          37055     3701.525  3701.525
## 258772:          45024     6530.520  6530.520
## 258773:           5134        0.000     0.000
## 258774:          46368     7007.640  7007.640

project

Given a sample file, we can project forward a number of years

s1617 <- project(s1314, h = 3L)

or to a particular financial year

s1718 <- project_to(s1314, "2017-18")

Together with model_income_tax, this allows us to make point-predictions of future years. The function revenue_foregone prettily prints the resultant revenue:

sample_file_1314 %>%
  project_to("2018-19") %>%
  model_income_tax(baseline_fy = "2017-18",
                   ordinary_tax_thresholds = c(0, 18200, 37000, 87000, 
                                               150e3)) %>%
  revenue_foregone

## [1] "$1.7 billion"

compare_avg_tax_rates:

Create comparison of average tax rates:

lapply(list("30k" = 30e3,
            "36k" = 36e3,
            "42k" = 42e3),
       function(T2) {
         model_income_tax(s1718,
                          baseline_fy = "2017-18",
                          ordinary_tax_thresholds = c(0, 
                                                      18200,
                                                      T2,
                                                      87000, 
                                                      180e3))
       }) %>%
  rbindlist(idcol = "id",
            use.names = TRUE,
            fill = TRUE) %>%
  compare_avg_tax_rates(baseDT = .[id %ein% "36k"]) %>%
  ggplot(aes(x = Taxable_Income_percentile,
             y = delta_avgTaxRate,
             color = id,
             group = id)) +
  geom_hline(yintercept = 0) +
  geom_line()

## Warning: Removed 6 row(s) containing missing values (geom_path).

NEWS

2023.0

• _inflator functions have been moved to grattanInflator, breaking (for example) cpi_inflator_general_date which are now cpi_inflator.

2.0.0.0

Breaking changes

• income_tax no longer accepts family_status, n_dependants, allow.forecasts and .debug

• model_income_tax Arguments prefixed Budget_ and lito_ are deprecated and now offsets = set_offsets are preferred. However, using System with income_tax is likely to be just as convenient.

• lito and lmito no longer accept varying parameters, but lmito is now exported

• sapto_rcpp, income_tax_sapto, new_income_tax, new_medicare_levy, and new_sapto have now been removed. Use System.

• The transfer functions have been removed as they became unreliable / difficult to maintain. See repository hughparsonage/grattanTransfers for possible future development

  • age_pension
  • carer_payment
  • child_care_subsidy
  • energy_supplement
  • family_tax_benefit
  • model_child_care_subsidy
  • model_rent_assistance
  • newstart_allowance
  • pension_supplement
  • rent_assistance
  • student_repayment
  • unemployment_benefit
  • youth_allowance
  • youth_unemployment

• The grattan v2 package will be more focused on income tax with other elements being spun off into other packages. In particular, _inflator functions and related forecasting methods, functions essentially accessing ABS data, and functions relating to tranfers will be put in other packages, and imported later. Functions that are made available in the grattan NAMESPACE may have changes to their API when this happens.

API changes

• income_tax now uses System to define the tax system

Other changes

• model_income_tax does not throw an error for incorrect specification of lito_ arguments (which are deprecated)
• age_grouper now works with long vectors containing missing values

1.9.0.10

• New data changes to 2022
• rent_assistance() example no longer works because of outdated data.

Breaking changes anticipated in 2.0.0.0

• income_tax and medicare_levy no longer accept family_status as an input, since it was giving misleading results. Use .dots.ATO with appropriate variables to define the spouse’s income or the number of children.
• income_tax gives a slightly different error message when an invalid financial year is passed. Previously “not in correct form”, now “not a valid financial year”.
• useABSConnection = TRUE is no longer supported because of ABS server issues

1.9.0.8

• Maintenance release for the new financial year.

1.9.0.0

New features

• 2017-18 sample file now contemplated as an input to project
• project now has r_super_balance to project super balances by a user-supplied factor, rather than a hard-coded 1.05.
• Modelling superannuation changes now accepts contributions taxes relative to marginal rates.

Data

• Data updated to 2020-06-30

Internal:

• package:rsdmx is now Suggested, since a dependency has been orphaned.

1.8.0.1

Bug fixes

• Fixed issue with stringsAsFactors = FALSE being inconsistently applied with R 4.0

Data

• Update wage, CPI, and labour force data

1.7.1.4

• Fixed minor error that affected tax liability calculations for 2010-11 and 2011-12 financial years

1.7.1.3

• grattan’s tax modelling functions now work with the 2016-17 ATO sample file

1.7.1.1

• grattan now depends on R 3.5.0 due to serialization format version 3 becoming the default in R 3.6.0.
• cpi_inflator fails more gracefully when the ABS’s website is not available

1.7.1.0

Bug fixes

• income_tax now gives consistent results modulo the existence of completely empty columns that are inputs for sapto (#158)
• income_tax will work if .dots.ATO is a non-data.table data.frame.
• model_income_tax:
  • Correctly imputes SAPTO vs non-SAPTO family thresholds when both provided.
  • sapto_rcpp is now more careful about passing length-one vectors to vectorized C++ functions.
• project now correctly prioritizes excl_vars over variables with otherwise predefined uprating mechanisms (such as Sw_amt).

New functions:

• awote for weekly earnings

Enhancements:

• age_grouper can now have a custom first label prefix, and is much faster when length(age) is large.
• income_tax now emits a warning when both age and .dots.ATO are provided, indicating that age will be ignored.
• The data has been updated to 2019-02-23.

Internal

• mutate_ntile and weighted_ntile now use the hutils equivalents. This broke 3 unit tests because of the specific phrasing of some error messages.
• The vignette requires pandoc > 2.4. Some chunks have been refactored to avoid excess memory usage.

1.7.0.0

Bug fixes

• Fixed failing interaction between temporary budget repair levy and small business tax offset in 2016-17.
• small_business_tax_offset() is now always positive, fixing the original misinterpretation of the legislation whereby negative business income resulted in a negative offset.
• *_inflator functions now return correct results for non-standard but supported financial years.
• inflator no longer fails when to_fy is length > 1 and unordered.

New features

• mutate_ntile and mutate_weighted_ntile for adding quantile columns
• New welfare functions (usable for the 2015-16 financial year)
  • age_pension,
  • carer_payment
  • carers_allowance
  • energy_supplement
  • family_tax_benefit
  • newstart_allowance
  • pension_supplement
  • rent_assistance the Commonwealth Rent Assistance
  • model_rent_assistance as experimental function for modelling changes to rent assistance.
  • youth_allowance() now available, though limited
• compare_avg_tax_rates: create a difference in average tax rates between multiple models and a baseline tax, by percentile.
• install_taxstats() as a convenient means to install the non-CRAN taxstats dependency.

Enhancements

• prohibit_vector_recycling() and friends return more informative error messages.
• Added default values to the following functions:
  • income_tax, income_tax_sapto: the default value for fy.year is the current financial year
  • cpi_inflator, lf_inflator_fy, wage_inflator: if both from_fy and to_fy are missing, the default values become the previous and current financial years respectively. If only one of the two are missing, an error appears.
• income_tax is about twice as fast since 1.6.0.0: 1.5-2.0s down from 3.0-3.7s on the 100% population (13 million)
• inflator and cpi_inflator, lf_inflator_fy, and wage_inflator are now much faster when either from_fy or to_fy have more than 100,000 elements:

set.seed(19952010)
from_fys <- sample(yr2fy(1995:2010), size = 1e6, replace = TRUE)
microbenchmark(cpi_inflator(from_fy = from_fys, to_fy = "2015-16"))
# Old
Unit: seconds
                                                expr      min      lq     mean   median       uq
 cpi_inflator(from_fy = from_fys, to_fy = "2015-16") 1.519483 1.54438 1.550628 1.549735 1.554507
      max neval
 1.661502   100
 
# New
Unit: milliseconds
                                                expr      min       lq     mean   median       uq
 cpi_inflator(from_fy = from_fys, to_fy = "2015-16") 40.71753 41.94061 47.93162 42.93946 48.08461
      max neval
 191.3497   100

Potentially breaking changes

• yr2fy(x) no longer works for x = 1900L, despite a unit test, for the sake of performance.

  #> Last change: NAMESPACE at 2018-08-19 14:47:14 (4 mins ago).
  #> Unit: milliseconds
  #>       expr min  lq mean median  uq max neval cld
  #>   yr2fy(z)  75  88   98     90 101 161   100  a 
  #>  .yr2fy(z) 274 286  298    297 302 359   100   b

Use yr2fy(x, assume1901_2100 = FALSE) if you need the old behaviour.

Misc/Internal

• taxstats1516 is now a suggested dependency.

1.6.0.0

2018-05-08

• Never-legislated Medicare levy change in 2019-20 has been reverted
• Budget 2018:
  • model_income_tax() no longer coerces WEIGHT to integer.
  • New arguments to support Budget 2018:
    • lito_multi Permits multiple pieces to the linear offset.
    • Budget2018_lamington The Low And Middle Income Tax Offset proposed in the Budget 2018 budget.
    • Budget2018_lito_202223 The proposed change to LITO from 2022-23.
    • Budget2018_watr The offset proposed by the Opposition the Budget Reply.
    • sbto_discount Allows modification of the small business tax offset.
    • clear_tax_cols By default, old tax columns are deleted.
    • warn_upper_thresholds If changed to FALSE allows the automatic changes to be applied without warning.
• New functions:
  • progressivity() for Gini-based measure of the progressivity of income tax
  • revenue_foregone() as a convenenience for returning the revenue foregone from a modelled sample file.
• Routine changes:
  • ABS data updated as of 2018-05-21.

1.5.3.6

2018-02-21

• Labour force data and wage price index updated to 2018-02-21.
• Update as requested to fix failing unit tests relying on non-standard packages.

1.5.3.1

2018-01-22

New features:

• New function model_income_tax which attempts to provide every lever of the income tax system that is visible from the tax office’s sample files. Users can model the sample file by changing single parameters to observe the effect on tax collections.
• small_business_tax_offset: Include the small business tax offset as a standalone function and within income_tax.

Other user-visible changes

• project and project_to no longer require fy.year.of.sample.file. However, they expect the supplied data.frame to be compatible with the sample file provided. Failling to provide a sample file with the expected number of rows or not providing a sample file with a valid number of rows is a warning, which can be silenced by check_fy_sample_file = FALSE.

Data:

• Update labour force data to November 2017
• Internal projection tables have been updated for the latest (2014-15) sample file.

Other changes

• mgcv was used but not declared in Suggests: Thanks to BDR for reporting.
• (internal) Extend prohibit_vector_recycling to return the maximum permissible length of a list of vectors.

1.5.2.5

2017-11-16

• Update wage data to 2017-Q3
• Update labour force data to 2017-09
• (internal) The lf_trend internal data table used to report the labour force in thousands of persons, as the ABS does. This seemed a bit strange, so now obsValue uses integers (i.e. just the labour force).
• Vignettes now install taxstats to a temporary directory if not already installed, rather than the user or system’s library.

2017-10-27

• Update CPI data
• Fix wage data

1.5.2.3

2017-10-21

• Update labour-force data

1.5.2.0

2017-10-19

• New internal C++ functions for income_tax, and related functions
• BTO function now uses tax scales from the Income Tax Regulations

1.5.1.2

2017-10-15

• Optional argument age in income_tax now NULL rather than 42.
  The default argument continues to result in SAPTO being not applied if .dots.ATO. However, if .dots.ATO is supplied (and the age variable has not been removed from it), the individuals’ SAPTO eligibility is determined by the age variable in .dots.ATO, rather than setting each individual’s SAPTO to 0.

2017-08-30

• Update labour force data. Avoid segfault in separate package in unit test.
• Added a NEWS.md file to track changes to the package.

2017-08-16

• Update wage, CPI, labour force data

2017-07-02

• Update wage and labour force data
• Fix breaking build due to change in dplyr API

CRAN Notes

This is a package update

Test results

0 ERRORS | 0 WARNINGS | 1-2 NOTEs

NOTES:

Notes for taxstats are routine