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  • Measuring the gap

    We use a top-down approach to estimate the GST gap on an accruals basis. The top-down approach compares:

    • total accrual GST liabilities for a year, with
    • theoretical GST liabilities for that year, calculated using external data.

    In calculating the GST gap estimate, we first estimate the amount of consumer spending subject to GST in the economy (that is, the GST base). We primarily use household final consumption expenditure (HFCE) and gross fixed capital formation (GFCF) in dwellings data. This is released by the Australian Bureau of Statistics (ABS) as part of the annual Australian National Accounts.

    Since we published the GST gap analysis in 2016–17, there have been a number of updates affecting the GST gap estimation model. Some updates are to the data used to calculate the gap, and others are to the method for calculation. With the revision of the ABS series data used in the model, there have been some significant revisions. These include revisions to the:

    • HFCE data
    • Tourism satellite account
    • Household Expenditure Survey (HES) – updated from 2009–10 to 2015–16
    • Tax Expenditures Statement (TES) data
    • Economic Transaction Method (ETM) data
    • expenditures that are subject to GST concessions or exemptions.

    From the estimated GST base, we derive the total theoretical GST liability amount by dividing it by 11, which equates to a GST rate of 10%.

    The methodology is based on the approach recommended by the International Monetary Fund (IMF) that is used globally for estimating value added tax (VAT) and GST gaps.

    We engage an independent expert panel to provide advice on the suitability of our gap estimates and methodologies. Further information regarding the panel, including the members, can be found at Australian tax gaps – overview.

    The reliability of the GST gap estimate is assessed as medium.

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      Last modified: 17 Oct 2019QC 57175