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  • Product stewardship for oil gap 2019-20

    This information is for historical purposes only. If you require previously published content for past estimates, please email taxgap@ato.gov.au.

    This estimate for the product stewardship for oil gap relates to the 2019-20 financial year

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    This gap forms a part of our overall tax performance program.

    The product stewardship for oil aims to encourage the recycling of used petroleum-based oils and synthetic equivalents. It achieves this by offering a benefit paid to oil recyclers who recycle these products.

    Under the program, a levy (in the form of excise and customs duty) is collected on all petroleum-based oil or their synthetic equivalents produced in or imported into Australia. This levy is used to fund the benefits paid to recyclers of used oil. Oil recyclers are required to register for excise manufacture to be eligible for the benefit.

    We conduct regular assurance activities, including both:

    • regular contact with oil recyclers
    • sampling of the grades of oil produced under the program for category 1 clients

    Our estimate of the product stewardship for oil gap covers a six-year period between 2014–15 and 2019–20. For 2019–20, we estimate the gap to be approximately $0.926 million or 0.62% of the amounts that should theoretically be administered by this program.

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    Trends and latest findings

    This is the second year we have released the product stewardship for oil gap estimates. We have generally found a gap of under 1.5% for most years. We expect the gap to continue to be low in future years, given the thoroughness of our compliance coverage for oil recyclers.

    Table 1 shows the program amounts administered and estimated gap from 2014–15 to 2019–20.

    Table 1: Product stewardship for oil gap, 2013–14 to 2018–19

    Element

    2014–15

    2015–16

    2016–17

    2017–18

    2018–19

    2019–20

    Program amounts administered ($m)

    97

    105

    121

    126

    121

    149

    Program gap ($m)

    1.5

    1.3

    1.3

    1.6

    1.2

    0.9

    Program gap (%)

    1.5

    1.3

    1.1

    1.3

    1.0

    0.62

    Figure 1 displays the trend in tax reported and the gap over the same period.

    Figure 1: Program gap (percentage) – product stewardship for oil, 2014–15 to 2019–20

    Figure 1 shows the gross and net gap in percentage terms, as outlined in Table 1.

    ATO action to reduce the gap

    There is extensive oversight of the product stewardship for oil program as the number of active oil recyclers is small and highly concentrated.

    The product stewardship for oil benefit is paid in a highly regulated manner. Oil recyclers are required to obtain an excise manufacturer licence (except category 8 claimants) to be eligible for the benefit. We undertake close monitoring and assurance activities. We have regular contact with oil recyclers and regularly review quality testing results of recycled oils (category 1 benefits).

    The product stewardship for oil levy is payable on the release of eligible oils and lubricants from licensed customs warehouses and licensed excise premises into home consumption. Payments of the levy are monitored as part of excise administration.

    Our key strategies include:

    • client relationship management with key industry participants
    • registration verification and assurance checks for recyclers of oil
    • six-monthly review of independent laboratory testing of oil recycled under the program to ensure oil grade standards are met for category 1 benefits
    • compliance activity with oil recyclers.

    Methodology

    The product stewardship for oil has two sides:

    • a levy applied to new oil producers that assists in funding the program
    • a benefit paid to recyclers of used oils.

    As such, there is a separate gap analysis for each one. The results are then combined to form a total program compliance gap.

    For the levy, we use a bottom-up illustrative method. This extrapolates the compliance levels found in the fuel excise tax gap analysis to the product stewardship for oil levy, as the populations share key producers.

    We produced the gap using the following three steps:

    Step 1: Estimate the product stewardship for oil levy gap

    We estimate the product stewardship for oil levies that are hypothetically due using reference to industry-wide compliance results revealed through the fuel excise gap. We use a three year average to smooth the variation observed in the fuel excise gap.

    Step 2: Estimate the product stewardship for oil benefit gap

    The product stewardship for oil benefit analysis uses our industry compliance results to inform the program benefit gap. We apply a small uplift to allow for non-detection for oil recyclers that are not subject to compliance activity in a given year.

    Step 3: Combine Steps 1 and 2 to estimate the program level gap

    The results of the product stewardship for oil levy and benefit gap analyses are totalled to arrive at a program level compliance view. This is summarised in Table 2.

    Table 2: Summary of estimation process – product stewardship for oil (PSO) program gap

    Step

    Description

    2014–15

    2015–16

    2016–17

    2017–18

    2018–19

    2019–20

    1

    Estimate the product stewardship for oil levy gap ('000)

    909

    712

    764

    842

    602

    385

    2.

    Estimate the product stewardship for oil benefit gap ('000)

    605

    630

    548

    797

    558

    541

    3

    Combine Steps 1 and 2 to estimate the program level gap ('000)

    1,514

    1,343

    1,312

    1,638

    1,159

    926

    3.2

    PSO program gap (%)

    1.5%

    1.3%

    1.1%

    1.3%

    1.0%

    0.6

    Limitations

    The following caveats and limitations apply when interpreting this gap estimate.

    • The product stewardship for oil levy estimate is calculated with reference to the compliance levels indicated by the fuel excise gap analysis. We assume that compliance levels are similar for product stewardship for oil producers, given these segments share key producers.
    • The product stewardship for oil benefit gap has been calculated with compliance results attributed to the year in which the audit is undertaken, rather than the years the audit adjustments were made. This is not thought to influence the gap analysis considerably, as these would likely balance out over time.

    Updates and revisions to previous estimates

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

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

    For the 2021 Annual Report we produced a rollover estimate, rather than a full refresh. A rollover is applied where gaps meet the following criteria:

    • The gap must be stable/steady (little change being observed).
    • The gap should contribute less than 5% of the overall program as a rule of thumb.
    • The reliability rating should be rated at least a medium or above.

    There should be no expected impact on the gap from an external source during the projection year based on the following criteria:

    • economic impacts
    • law changes
    • known or suspected behaviour shift.

    The prior year estimate was a full refresh:

    • this effectively means that estimates for the 2014 to 2019 financial years remain unchanged – we updated Voluntary Amounts, Amendments, Non Detection and
    • unreported Amounts for the 2020 financial year only.

    Figure 2: current and previous net tax gap estimates, 2014–15 to 2019–20 (rollover component distinguished)

    Figure 2 depicts a graphical representation of the previously published estimates.

    Table 4: Current and previous net product stewardship for oil estimates, 2013–14 to 2019–20

    Year

    2013–14

    2014–15

    2015–16*

    2016–17*

    2017–18*

    2018–19*

    2019–20

    2020

    1.7

    1.5

    1.3

    1.1

    1.3

    1.0

     

    2021

    na

    1.5

    1.3

    1.1

    1.3

    1.0

    0.6

    Reliability

    We seek feedback and advice about the methods we use to estimate the gap from our external and internal subject matter experts. Based on the advice and assessment, the reliability for this estimate is high (with a score of 25).

    As with all gap estimates, the product stewardship for oil gap estimate remains sensitive to assumptions made. We will continue to monitor and test the overall approach as we improve it in future releases.

    Figure 3: Reliability rating scale from very low to very high – product stewardship for oil gap

    Figure 3: This image shows a graph that represents the reliability rating for the current product stewardship for oil program estimate. The rating scale includes: Very low which is a score between 0 and 10. Low which is a score between 11 and 15. Medium which is a score between 16 and 20. High which is a score between 21 and 25. Very high which is a score between 26 and 30. The graph shows the medium business gap estimate has a rating of 25, which is high.

      Last modified: 18 Nov 2022QC 70880