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  • Revenue

    The net GST cash collection2 outcome for 2015–16 was $57.4 billion, $3.1 billion (or 5.7%) higher than in 2014–15. Collections, including net Department of Immigration and Border Protection3 collections of $3.5 billion, were $301.6 million (or 0.5%) above the May 2015 Budget estimate and $98.4 million (or 0.2%) below the revised May 2016 Budget estimate.

    The 2015–16 Budget cash estimate was $57.1 billion. The forecast was increased by $200 million at the Mid-Year Economic and Fiscal Outlook (MYEFO). This was primarily as a result of higher than expected collections to November 2015.

    In the 2016–17 Budget, the cash estimate was increased by $200 million to $57.5 billion due to stronger than expected net GST collections. The final cash collections outcome for 2015–16 was $98.4 million lower than the Budget 2016–17 estimate. Weaker than expected May statement collections were the primary cause of the lower than expected outcome. The variance to both Budget forecasts is historically quite small.

    The difference between net GST accruals (on a tax liability method basis (TLM)4) and cash collections was $1.8 billion. Gross GST debt was the most significant component of this difference. The estimated total statement outcome for the June 2015 to May 2016 BAS (excluding GST collected by the Department of Immigration and Border Protection) was $53.9 billion.

    Table 10: GST revenue and collections (including net GST collected by the Department of Immigration and Border Protection)

    Year

    Net GST cash collections ($ billion)

    Net GST accrued (TLM) ($ billion)

    2015–16

    57.4

    59.2

    2014–15

    54.3

    55.7*

    2013–14

    51.1

    52.7

    * The previously published figure for 2014–15 ($56.1 billion) has been reduced to $55.7 billion to exclude liabilities that were yet to be raised for that year. The TLM basis excluded this estimate.
    2 Outcomes exclude non-general interest charge penalties.
    3 Net Department of Immigration and Border Protection collections include refunds issued under the tourist refund scheme.
    4 TLM is defined as being the earlier of the cash payment being received or the associated liability being recognised.
     

    The annual change in total net GST for 2015–16 was $2.4 billion, around $330 million lower than the annual change in 2014–15. Weaker growth in 2015–16 was concentrated in sectors primarily relating to the housing sector including construction, rental, hiring and real estate services, finance and insurance services and ‘other’ sectors. Partially offsetting weakness in these sectors was a large increase in net GST paid by the mining sector as well a rebound in the manufacturing sector.

    Figure 4: Change in net GST by industry 2014–15 and 2015–16
    (June to May statements)

    Figure 4 – Change in net GST by industry 2014–15 and 2015–16(June to May statements) graph This graph provides the change in net GST by industry from 2014–15 to 2015–16 presented in the table below.

    Industry codes legend

    Code

    Industry

    2014–15
    ($ million)

    2015–16
    ($ million)

    CON Construction 497 -650
    FIN Finance and insurance services -66 -493
    HCS Health -254 -171
    MFR Manufacturing -178 714
    MIN Mining 899 2,191
    OTH Other 1,121 -110
    PST Professional, scientific and technical services 106 423
    PAS Public administration and safety -137 350
    RHR Rental, hiring and real estate services 364 -188
    RTL Retail 332 125
    WSL Wholesale 71 234

    Note:

    • ‘Other’ includes accommodation and food, agriculture, arts and recreation, administrative and support, information and media, education, electricity, gas and water, other services, transport, postal and warehousing, and unknown.

    Goods and services tax gap

    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.

    Trend in GST gap

    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 position that differs from the ATO view of the law.

    Tax gaps are estimates. The GST gap is useful in providing insights into the longer-term operation of the GST system. Tax gaps, along with other performance measures, tell a story about levels of willing participation and signification 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, we aim to identify, manage and sustainably reduce the GST gap over time.

    The GST gap estimate should be viewed as a trend over time. The dollar value is indicative rather than definitive. There is a margin of error which may not be quantifiable.

    Figure 5: GST Gap 2010–11 to 2015–16

    Figure 5 – GST Gap 2010–11 to 2015-16 graph This graph shows the GST gap as a percentage of revenue by GST gap, GST gap trend and the GST gap (including debt) from 2010–11 to 2015–16, explanatory text follows.

    Notes:

    • The data for the reporting period 2015–16 relates to gap estimates in the tax year 2014–15.
    • Caution should be exercised in interpreting results for 2009–10. A fall in non compliance of such magnitude is highly unlikely and we believe the movement is more likely a reflection of the relationship between Australian Bureau of Statistics national accounts data and tax data during that period.

    The GST gap for 2015–16 was estimated to be $3.66 billion, excluding debt; this is 6.3% of theoretical revenue. The GST gap, including debt, is estimated to be 6.5% of theoretical revenue.

    Table 11: GST Gap 2012–13 to 2015–16

    GST gap summary

    2012–13 ($ billion)

    2013–14 ($ billion)

    2014–15 ($ billion)

    2015–16 ($ billion)

    Net GST gap excluding debt

    $3.03

    $2.61

    $2.70

    $3.66

    Net gap excluding debt as a percentage of theoretical revenue

    6.0%

    5.0%

    4.9%

    6.3%

    Net gap with debt as a percentage of theoretical revenue

    7.0%

    5.8%

    6.1%

    6.5%

    Notes:

    • The data for the reporting period 2015–16 relates to gap estimates in the tax year 2014–15.
    • Prior year estimates of the GST gap and voluntary compliance ratio are regularly refreshed as BAS are lodged or amended. The GST gap is also adjusted to account for revisions to external data sources such as the Australian Bureau of Statistics. This process results in differences in the prior year estimates to what was previously published.

    Impact of compliance activity on GST gap

    We estimate 93.7% of 2015–16 theoretical GST revenue has been reported to the ATO. Further we estimate the GST revenue base comprises:

    • 89.7% revenue lodged and reported by business without direct ATO compliance interventions
    • 4.0% actively encouraged or forced to comply through ATO active compliance interventions.

    The business community and ATO strategies play important roles in underpinning GST compliance levels. While there is not a direct correlation, it is reasonable to observe that without the preventative and direct ATO compliance activities and related incentives for full compliance, the GST gap would be approximately 10.3% for 2015–16.

    Figure 6: Impact of compliance action on the GST gap 2010–11 to 2015–16

     Figure 6 – Impact of compliance action on the GST gap 2010-11 to 2015-16 graph The data that built this graph, showing the impact of active compliance on the GST gap by showing the GST gap and GST without active compliance interventions from 2010-11 to 2015-16. The distance between these two equals the impact of active compliance on the GST gap, as detailed in the table below.

    Table 12: GST gross and net tax gap 2012–13 to 2015–16

    Gross and net GST gap as percentage of theoretical revenue

    2012–13

    2013–14

    2014–15

    2015–16

    Gross gap - Net gap excluding ATO compliance revenue (excluding debt)

    10.0%

    8.9%

    8.9%

    10.3%

    Net gap (excluding debt)

    6.0%

    5.0%

    4.9%

    6.3%

    GST voluntary compliance ratio

    Last year was the first time we published information on the GST voluntary compliance ratio (VCR). This approach has continued to be refined this year as a complementary measure to the work undertaken on GST gap.

    We believe that understanding the proportion of taxpayers who voluntarily comply with their obligations, and identifying the value of GST remitted voluntarily, assists in gauging the health of the GST system and provides confidence in its operation across the community. One way we determine these factors is through the VCR analysis.

    Methodology

    The VCR seeks to measure the proportion of taxpayers who are fully compliant with four key tax obligations, the ‘pillars of compliance’. They are: GST registration, BAS lodgment, BAS payment and the level of correct reporting of business activity. A measure across these pillars gives a view of the level of voluntary compliance through seeking to determine how many GST taxpayers are correctly registered, lodge by the required due date, report the correct amount of GST, and pay this amount on time.

    Measurement

    The methodology measures voluntary compliance at two key levels:

    1. GST revenue value level – examines the value of GST revenue that is voluntarily provided to the ATO in accordance with the law. This year, we estimate that 81.8% of expected GST revenue has been reported.

    Figure 7: VCR by revenue value

    Figure 7 – Voluntary compliance ratio by revenue level graph The data that built this graph, showing the results for the voluntary compliance ratio by revenue value from 2010–11 to 2014–15. Results are 81.4% in 2010–11, 81.7% in 2011–12, 81.2% in 2012–13, 83.8% in 2013–14, 81.8% in 2014–15, as detailed in the explanatory text above.

    Note:

    • Previous year figures have been updated with latest GST gap data.
    1. GST taxpayer level – examines the number of taxpayers who completely meet all their obligations for the financial year. This year, we estimate that 44.6% of taxpayers met their obligations. This figure is the level of taxpayer compliance in the strict sense (i.e. without behavioural or sensitivity assumptions applied). Therefore, the VCR in the strict sense, does not give any consideration to minor late payments or lodgments by taxpayers who we believe are intending to be compliant.
      • Greater insight is gained if the level of taxpayer compliance is measured allowing for:
        • Clients who have no total business income in the year (a nil BAS)
        • Clients who are only considered non-compliant for having one BAS lodged late and/or one late payment.
         
      • Measured in this way, the level of voluntary compliance by taxpayers is 82.4%. This approach recognises the significant proportion of taxpayers who aim to do the right thing, but for one reason or another, are late with either a single lodgment or payment.
       

    Figure 8: VCR by GST taxpayer level

    Figure 8 – Voluntary compliance ratio by GST taxpayer level graph The data that built this graph, showing the results for the voluntary compliance ratio by taxpayer level from 2009–10 to 2014–15. The top line shows VCR at taxpayer level recognising minor variations and the lower line shows VCR at taxpayer level in the ‘strict sense’. Results for the top line (from financial years 2009–10 to 2014–15) are: 82.4%, 81.8%, 81.2%, 84.5%, 86.2% and 82.4%.Results for the lower line (from financial years 2009–10 to 2014–15) are: 48.8%, 47.7%, 47.2%, 48.2%, 49.0% and 44.6%, as detailed in the explanatory text above

    Note:

    Previous year figures have been updated with latest GST gap data.

      Last modified: 20 Apr 2017QC 51810