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  • Australian tax gaps – overview

    The tax gap is an estimate of the difference between the amount the ATO collects and what we would have collected if every taxpayer was fully compliant with tax law. Tax gaps exist in all countries to some extent, and the drivers include:

    • cultural and human factors
    • global forces
    • complexity in business and legal systems
    • those who take aggressive tax positions
    • 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. This might be due to a misunderstanding, by choice, or by taking a tax position that differs from the ATO view of the law. As a result, all tax gap estimates are subject to a degree of error. They can change from year to year due to improvements in the methodologies used and revisions of underlying data.

    Tax gap estimates and their trends over time provide useful insights into the longer-term operation of the tax and superannuation systems. Along with other performance measures, they tell a story about the performance and integrity of the system. This includes levels of willing participation and significant shifts in compliance. They can guide us in determining priority risks and opportunities to better inform where we invest our resources.

    Rapid changes in the economy, society and technology mean the issues driving tax gaps continue to evolve. No tax system can fully eliminate tax gaps, as the cost of doing so would be excessive.

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

    In the main, the estimates we have published reflect a system that is operating well. The estimates are backed by methodologies we have confidence in. As we develop new and improved methodologies, we will release more estimates. These will cover more taxes and revenue streams.

    In this overview of tax gaps in Australia, we explain how and why we measure tax gaps, our approach and a summary of the latest available data.

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    See also:

    Transaction-based tax gaps:

    Income-based tax gaps:

    Administered program gaps:

      Last modified: 12 Mar 2020QC 53161