Tax gap estimates

The tax gap is an estimate of the difference between what the ATO collects and the amount that would have been collected if every taxpayer was fully compliant.

Tax gaps exist in all countries to some extent. They are driven by cultural and human factors, global forces, complexity in business and legal systems, those who seek aggressive tax positions, and genuine errors.

Estimating tax gaps is a challenging task for any jurisdiction. Tax gaps are, in effect, about measuring what is not visible – what people have not told us about their compliance, whether through misunderstanding, by choice or by taking a tax position that differs from the ATO view of the law.

Tax gaps are estimates. They are useful in providing insights into the longer-term operation of the tax and superannuation systems. They, along with other performance measures, tell a story about levels of willing participation and significant shifts in compliance. They can guide us to the priority risks and opportunities, and where to invest our resources.

Because of rapid changes in the economy, society and technology, issues driving tax gaps continue to evolve. No tax system can eliminate tax gaps; the cost of doing so would be excessive.

Instead, the ATO aims to identify, manage and sustainably reduce tax gaps over time. Effective tax gap management requires engagement with all stakeholders about the size of tax gaps, the risks and drivers, and how we can collaboratively address these issues.

Gap estimates should be viewed as trends over time, in conjunction with our performance measures. The dollar value is indicative rather than definitive.

All estimates have a margin of error which may not be quantifiable. All our estimates are subject to limitations and caveats that need to be considered. Explanations of our methodologies are available on our website.

TABLE 2.8 Net tax gap estimates – Indirect taxes, 2011–12 to 2015–16(a)(b)(c)(d)
 

Reliability assessment

 

2011–12

2012–13

2013–14

2014–15

2015–16

Taxes on goods and services

GST

Medium

%

7.0

7.0

5.8

6.1

6.5

$m

3,450

3,550

3,000

3,360

3,780

Luxury car tax(e)

Medium

%

5.8

4.6

5.1

4.7

5.2

$m

30

25

25

25

30

Wine equalisation tax(f)

Low

%

4.1

4.9

0.5

5.9

na

$m

40

50

5

70

na

Excise and customs duties

Petrol and diesel

Medium

%

0.5

0.5

2.4

2.2

0.8

$m

75

75

405

370

135

  1. GST rounded to the nearest $10 million, all other smaller revenue streams rounded to the nearest $5 million.
  2. Beer excise and duty gap estimate has been withdrawn due to identified issues with data.
  3. Changes from previously published estimates are due to revisions to ABS data, updated ATO data and a modified approach to determining liabilities reported but not paid. Revisions to the estimates occur over time for a variety of reasons, including improvements in methodology, revisions to external data and additional or updated data becoming available.
  4. Due to data lag, the data for the reporting period 2015–16 relates to gap estimates in the tax year 2014–15. This same rationale applies for prior years.
  5. Estimate for luxury car tax payable only, not taking into account luxury car tax refunds.
  6. Estimate for wine equalisation tax payable only, not taking into account wine producer rebates.

 

TABLE 2.9 Net gap estimates – Programs we administer, 2011–12 to 2015–16(a)(b)(c)
 

Reliability assessment

 

2011–12

2012–13

2013–14

2014–15

2015–16

Administered programs

Pay as you go (PAYG) withholding

Low

%

2.9

3.0

2.1

1.4

na

$m

3,780

4,350

3,240

2,140

na

Fuel tax credits

Medium

%

0.6

0.8

0.6

0.6

–0.4

$m

30

45

30

35

–25

  1. PAYG withholding rounded to the nearest $10 million; fuel tax credits rounded to the nearest $5 million.
  2. Changes from previously published estimates are due to revisions to ABS data, updated ATO data and a modified approach to determining liabilities reported but not paid. Revisions to the estimates occur over time for a variety of reasons, including improvements in methodology, revisions to external data and additional or updated data becoming available.
  3. Due to data lag, the data for the reporting period 2015–16 relates to gap estimates in the tax year 2014–15. This same rationale applies for prior years.