Commonwealth government tax expenditures arise because departures from the tax structure produw ,favourable tax treatment ofparticular types of activities or taxpayers. Such tax concessions can be used in the same way as direct expenditures to give effect to government policies, and in facture often used as substitutes for direct expenditures. Although estimates of tax expenditures on health in more recent rimes are readily available, this ,form of subsidisation of the health sector has not been used heavily since the introduction of Medicare in 1984. It is f b r the period spanning the 1960s and the I970s, when tax expenditures were a much more important source of health care finance, that consistent estimates are lacking. This article presents estimates of the revenue cost of income tax conc,essions for health in Australia over th.e period 196041 to 198849 and integrates these estimates into the currently available health expenditure statistics. It is concluded that failure to allow f o r tax expenditures on health when analysing public expenditures on health in Australia can lead to misleading conclusions about the net fiscal impact of chunges in the Commonwealth's health expenditure policy. In particular. the ,fiscal effect of introducing Medibank in antly lower if account is taken of changes to tax concessions on health ocnuring at the same time. Likewise, the net cost ofthe introduction of Medicare in 1984 is overstated by measures based on direct outlays alone.
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