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  • Large corporate groups income tax gap

    The large corporate groups income tax gap is the difference between the total amount of income tax collected from large corporate groups and the amount we estimate would have been collected if every one of these taxpayers was fully compliant with tax law.

    A large corporate group is defined as a corporate group with gross income of over $250 million in a given financial year. In 2016–17, large corporate groups:

    • reported $1.8 trillion in gross income
    • generated $156 billion in taxable income
    • paid around $47 billion in income tax.

    In this document we discuss the large corporate group population, how we measure their income tax gap, and the actions we are taking to sustainably reduce the gap.

    Estimate of the tax gap

    Our updated estimate of the large corporate groups income tax gap covers the 2010–11 to 2016–17 financial years.

    For 2016–17 we estimate the net income tax gap for large corporate groups is $2 billion, or 4%. In other words, we estimate large corporate groups paid around 96% of the total theoretical tax payable by them in 2016–17.

    We estimate this gap using a model-based bottom-up approach, employing micro-analytical techniques. The model uses ATO compliance and assurance data, and assumptions informed by expert views.

    This gap is primarily driven by differences in the interpretation of complex areas of tax law.

    Tax and large corporate groups

    Australia's large corporate groups make a significant contribution to our economy and tax system. We are confident that the majority of them pay the right amount of tax. Our confidence comes from improved capability and targeted strategies, as well as legislative provisions strengthening tax laws.

    We recognise that economic cycles and timeframes for earning a return on investments can affect the profitability and tax payments of large corporate groups. This means they sometimes make economic losses and pay no tax. Investment incentives and features of the tax system also mean tax is not simply 30% of gross income.

    Some large corporate groups choose to deliberately avoid their tax obligations. The tax gap reflects this deliberate non-compliance, and we take firm compliance action to address this behaviour. Our public advice and guidance program is an important approach to reduce the spread of non-compliance and ensure the gross tax gap does not increase.

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      Last modified: 17 Oct 2019QC 57641