No room for complacency as tax gap figures released

SYDNEY, 12 July 2018: Figures released by the ATO today indicate non-compliance is a key factor in the “individuals not in business” tax gap.   

The individual not in business tax gap sits at $8.7 billion or 6.4% for the 2014-15 financial year, which in absolute terms is substantially bigger than the corporate tax gap. 

Professor Bob Deutsch, Senior Tax Counsel at The Tax Institute says, “This figure suggests that the extent of non-compliance among individuals is substantially higher in macro terms than for large corporate groups. 

However, in percentage terms, Professor Deutsch points out that there is approximately only a half percentage point difference. 

“Individuals contribute roughly 40% of the tax revenue and large corporate groups only contribute about 12%.” 

Table: Comparison between the ‘Individuals not in business’ and ‘Large Corporate Groups’ tax gap figures.

	Theoretical tax liability ($)	Tax reported/paid ($)	Gap ($)	Gap (%)
Individuals not in business	$137 billion	$128.3 billion	$8.7 billion	6.4%
Large corporate groups	$43.2 billion	$40.7 billion	$2.5 billion	5.8%

Source: ATO ‘Large Corporate Groups’ and ‘Individuals not in business’ tax gap figures available on www.ato.gov.au. 

The ATO’s research has uncovered from random reviews of tax returns of individuals not in business, that 70% of returns had one or more error. Many of these errors were small but avoidable and some were deliberate. Errors were most prevalent in the claiming of work-related expenses. 

“Complacency in the deduction claiming process is no longer an option”, says Professor Deutsch. 

Background 

The income tax gap is an estimate of the difference between the total amount of tax that is collected from individual taxpayers who do not run any form of business and the amount which the Australian Taxation Office believes it would have collected if every taxpayer was fully compliant with the law. In other words, this measures the deficiency in tax collected from individuals not in business in Australia. In the 2014-2015 year, that difference is about $8.7 billion and in the previous year about $7.4 billion. In percentage terms, the amount across the two years is very similar. 

ENDS 

For more information, please contact: Stephanie Conway, Media Relations: 02 8223 0011. 

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