Four Pillars of Compliance: Participation in the System Indicators
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The aim of this paper is to:
- provide information about the ATO's effectiveness indicators and what they show about compliance with the Australian taxation system;
- seek suggestions for either additional indicators or improvements to existing indicators.
Measuring effectiveness in managing a tax (or superannuation) system is not an easy task, but one which is of particular importance for revenue authorities hoping to understand the level of compliance with tax obligations in a community as a whole. This is an area of research that many tax administrations across the world are engaged in.
The ATO has been assessing the effectiveness of specific strategies and programs for some time, but it is also valuable to assess the overall effectiveness of the ATO's administration of the tax and super systems as a whole.
To this end, the ATO developed, after comprehensive research and testing, a suite of indicators called the 'Participation in the System Indicators', based broadly on the proposition that the level of participation in the system is a good indicator of the level of compliance with tax obligations generally, and that the level of compliance is an obvious measure of the effectiveness of a revenue authority.
These indicators use a combination of taxation, economic and demographic data to measure participation levels in relation to the four 'pillars of compliance' of the Organisation for Economic Cooperation and Development (OECD). These are:
- correctly registering in the system
- lodging tax information on time
- reporting complete and accurate information
- paying tax obligations on time.
At this stage the indicators have been applied to the following liabilities:
- Individual Income Taxation
- Entity Income Taxation
- Business Activity Taxation (activity statements).
In brief, the findings suggest that there is overall a relatively high level of participation in, and compliance with, the tax system and that the level of participation has remained relatively stable over time.
The indicators developed so far are only the first step in monitoring the level of participation by the community, and the results from these indicators and any additional indicators that are developed in the future will continue to be published.