The GST gap estimate may not reflect the true level of under-compliance in the GST system as there is likely to be a degree of over-compliance. This may occur where taxpayers under-claim GST credits they are entitled to or incorrectly classify supplies as subject to GST when they are actually GST-free.
As a result, the real revenue gap using a top-down methodology may be understated. We are currently working on a methodology to estimate the value of this over-compliance, and will include adjustments in future updates.
There are limitations with using external benchmark data to estimate theoretical GST liability:
- As the GST gap is derived from an extensive estimation process, any errors in the calculation will be reflected in our estimate. GST gap estimation relies on National Accounts and Tax Expenditure Statement estimates, and therefore depends on the accuracy and completeness of that data.
- Currently, we do not have a margin of error for the GST gap estimate. Each of the assumptions used in the top-down model have their own errors, many of which are unquantifiable. We are assessing the feasibility of calculating a margin of error for the GST gap estimate.
- The Tax Expenditure Statement estimates used in calculating the value of GST concessions can have a wide range, and are not exhaustive list, so our analysis requires some judgment when estimating these values.
- National Accounts data is subject to revision which can result in changes to the estimated GST gap over time.
- Timing differences can exist between consumption as reported in National Accounts and when GST is reported and paid to us.
- The GST gap measurement is reliant on the timeliness of ABS data, including revisions to the input–output tables and data.