4 pillars of compliance
The 4 pillars of compliance are:
- registration
- lodgment
- reporting, and
- payment obligations.
Where possible, we estimate the amount of revenue not collected from those who fail to register or lodge. However, penalties and interest are not included in gap estimates.
2 measures of the tax gap
We have 2 measures of the tax gap – the gross gap and the net gap.
The gross gap is the difference between the amount:
- voluntarily reported to the ATO
- we would have collected if every taxpayer was fully compliant with tax law (that is, the theoretical tax liability).
The net gap is the difference between the amount:
- voluntarily reported to the ATO plus amendments because of compliance activities and voluntary disclosures
- we would have collected if every taxpayer was fully compliant with tax law.
We estimate gaps for the year the economic activity occurred and are based on the law and the administrative approaches at that time.
Figure 3 shows the components of the tax gap, including the net gap, the gross gap, the amount reported and theoretical tax liability.
Figure 3: Components of tax gap