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  • Methodology

    The fuel tax credits gap is derived through applying a bottom-up model-based method. We use five steps in applying this method to estimate the gap. These steps are expanded on below followed by a summary of the overall estimate:

    Step 1: Calculate ratio of extrapolation to total amendments

    Calculate the mean amendment and incidence rates for underclaims and overclaims found in the random enquiry program (REP) and extrapolate to the 2014–15 population. Take the extrapolated amount and divide by the total amendment value to obtain a ratio. The ratio used is the same as for the 2019 release.

    Step 2: Apply the ratio to each year

    Take the ratio from Step 1 and multiply by the total amendment value for the respective year.

    Step 3: Estimate for non-detection

    Multiply the amount from Step 2 by the uplift factor to account for non-detection.

    Step 4: Estimate for non-pursuable debt

    Add non-pursuable debt to account for over claims not repaid.

    Step 5: Estimate the gross gap, net gap and theoretical credit

    Add Step 2, Step 3 and Step 4 to estimate the gross gap. Then subtract the amendments from it to estimate the net gap. The theoretical credit is then estimated by subtracting the gross gap from the voluntary credits. The gap percentages are derived by dividing the gap amounts by the theoretical credit.

    Summary of the estimation process

    Table 2 displays the dollar values at each step rounded to the nearest million.

    Table 2: Summary of estimation process for steps of the fuel tax credits gap

    Step

    Description

    2014–15

    2015–16

    2016–17

    2017–18

    2018–19

    1

    Calculate ratio of extrapolation to total amendments ($m)

    1.09

    1.09

    1.09

    1.09

    1.09

    2

    For each year multiply total value of amendments by the same ratio ($m)

    −40

    −51

    −47

    −50

    −44

    3

    Add estimate for non-detection ($m)

    −10

    −13

    −12

    −13

    −11

    4

    Add claims made incorrectly and not paid back ($m)

    7

    7

    7

    7

    7

    5.1

    Combine previous steps results to give gross gap ($m)

    −42

    −57

    −51

    −55

    −47

    5.2

    Subtract Amendments to obtain net gap ($m)

    −6

    −10

    −8

    −9

    −7

    5.3

    Estimate theoretical credit by subtracting the gross gap from total FTC claims ($m)

    6,095

    6,159

    6,344

    6,964

    7,192

    5.4

    Gross gap (%)

    −0.7%

    −0.9%

    −0.8%

    −0.8%

    −0.7%

    5.5

    Net gap (%)

    −0.1%

    −0.2%

    −0.1%

    −0.1%

    −0.1%

    Limitations

    The fuel tax credits gap estimates are derived from the randomly selected sample. They are subject to the following limitations:

    • Although it is assumed that the sample is representative of the population, there may be isolated instances of non-compliance around fuel tax credits outside the sample, which have not been captured in this analysis. It is also assumed that the ratio of the extrapolation to amendments is relatively constant over time.
    • The sample size for this random enquiry program (REP) is small. In general terms, the larger the sample the more reliable the results.
    • The extent of non-detection is unknown and is extremely challenging to measure. The REP is subject to uncertainty around the impact of the non-detection error.
    • This estimate does not include the population that may be entitled to fuel tax credits, but have not registered and lodged a claim to receive fuel tax credits.
    • This population does not include a small number of taxpayers who claimed for fuel tax credits for domestic electricity generation.

    Updates and revisions to previous estimates

    Each year we refresh our estimates in line with our annual report. Changes from previously published estimates occur for a variety of reasons, including:

    • improvements in methodology
    • revisions to data
    • additional information becoming available.

    Figure 2 displays the net gap from our current estimate, which uses the modified approach, compared to our previously published estimates.

    Figure 2: Current and previous net fuel tax gap estimates, 2011–12 to 2018–19

    Figure 2: shows the net gap estimates from previously published years as outlined in Table 3.

    For the estimate released in 2018, the change in 2014–15 from using the benchmark to the REP results led to the gap moving from positive to negative in that year. The current estimate, using the modified approach for each year from 2014–15 to 2018–19, produces a more stable series.

    The data used in Figure 2 is presented in Table 3 below.

    Table 3: Current and previous net fuel tax gap estimates, 2011–12 to 2018–19

    Year published

    2011–12

    2012–13

    2013–14

    2014–15

    2015–16

    2016–17

    2017–18

    2018–19

    2016

    1.5%

    1.5%

    1.5%

    n/a

    n/a

    n/a

    n/a

    n/a

    2017

    0.8%

    0.6%

    0.6%

    −0.4%

    n/a

    n/a

    n/a

    n/a

    2018

    0.7%

    0.7%

    0.8%

    −0.4%

    −0.2%

    −0.3%

    n/a

    n/a

    2019

    n/a

    n/a

    n/a

    0.0%

    −0.1%

    −0.1%

    −0.1%

    n/a

    2020

    n/a

    n/a

    n/a

    −0.1%

    −0.2%

    −0.1%

    −0.1%

    −0.1%

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      Last modified: 19 Oct 2020QC 57176