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  • Trends and latest findings

    The income tax gap for large corporate groups has generally trended down in recent years, from 6.4% for the 2012–13 financial year to the lowest revised estimate of 3.5%. The gap estimate remains low for 2017–18 at 3.7% which is consistent with the overall trend.

    Our gap results follow a similar trend to the Her Majesty's Revenue and Customs (HMRC) estimates for the large business population in the United Kingdom. HMRC use a marginally different definition of large corporate groups and a slightly different method.

    Income tax returns for large corporate groups are adjusted on average by around $2.1 billion each year, excluding interest and penalties. A small number of high value amendments account for most of the total value.

    The downward trend of the gap after 2013–14 coincides with a suite of legislative reforms and operational changes. We discuss some of these measures in Tax and Corporate Australia, including:

    • enhancements made to the general anti-avoidance rule and transfer pricing provisions
    • the adoption of transparency measures
    • the expansion of our justified trust program.

    The tax gap can be viewed in net and gross terms to show the impact of amendments on the gap.

    Table 1 shows the tax paid, adjustments, and net and gross income tax gap estimates for the period 2011–12 to 2017–18.

    Table 1: Income tax gap – large corporate groups, 2011–12 to 2017–18

    Element

    2011–12

    2012–13

    2013–14

    2014–15

    2015–16

    2016–17

    2017-18

    Population

    5,050

    5,152

    5,472

    5,677

    5,660

    5,688

    5,714

    Gross gap ($m)

    3,978

    4,860

    4,397

    4,075

    3,602

    3,722

    4,137

    Amendments ($m)

    1,397

    1,993

    1,754

    1,823

    2,016

    2,023

    2,103

    Net gap ($m)

    2,581

    2,867

    2,643

    2,252

    1,587

    1,699

    2,034

    Tax paid ($m)

    44,967

    42,039

    43,069

    43,430

    39,958

    47,113

    53,378

    Theoretical liability ($m)

    47,548

    44,906

    45,712

    45,682

    41,545

    48,812

    55,412

    Gross gap (%)

    8.4

    10.8

    9.6

    8.9

    8.7

    7.6

    7.5

    Net gap (%)

    5.4

    6.4

    5.8

    4.9

    3.8

    3.5

    3.7

    Figure 1 displays the trend in the gross and net income tax gap over the same period.

    Figure 1: Gross and net income tax gap (percentage) – large corporate groups, 2011–12 to 2017–18

    Figure 1: This graph is a representation of the gross and net gap percentages stated in Table 1 for the years 2011–12 to 2017–18.

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      Last modified: 19 Oct 2020QC 57641