Goods and services tax
Against the background of a challenging tax administration environment, our overall GST administration performance in 2010-11 was strong. We collected $45.9 billion on behalf of the states and territories, compared to $44.1 billion in 2009-10.
Despite small businesses experiencing ongoing financial difficulties, we were also able to contain the growth rate of GST collectable debt from 10.6% in 2009-10 to 1.4% in 2010-11. At 30 June 2011, collectable GST debt was $3.2 billion.
Through our active compliance activities this year we raised liabilities of around $3 billion (including penalties and interest) and collected about $2.1 billion from liabilities raised both in the current and prior years. These results were assisted by improvements in our risk profiling, particularly the use of new computer models and procedures.
Promoting voluntary compliance
In the 2010-11 federal budget we received an additional $337.5 million, over four years, to fund activities to promote voluntary GST compliance. This funding helped us to raise $290 million in GST liabilities.
As part of these activities we reviewed 530 cases and audited 3,178 taxpayers making potentially fraudulent claims for GST refund and those involved in deliberate evasion. A particular focus was the property industry where 672 cases raised $62.3 million. We contacted 1.3 million taxpayers to address non-lodgment and late lodgment of activity statements and increasing levels of debt.
We also identified that large companies in the financial services and insurance, mining and wholesale trade industries and small to medium businesses in the construction, wholesale, manufacturing and professional, scientific and technical services were making errors. During 2010-11 we undertook more than 3,300 compliance activities and raised assessments for more than $265 million of GST which included $180 million voluntarily disclosed by business after their own review.
Helping industry understand margin schemes
In 2010-11 we helped make the complex topic of margin schemes easier to understand with the publication of a new booklet.
Margin Scheme - made easy, produced in April 2011, provided information on how to apply the margin scheme, including relevant examples and a useful record keeping checklist.
We worked with the Housing Industry Association, the Property and Development Working Group and the National Tax Liaison Group to ensure the guide was promoted throughout the industry. They also provided feedback on examples and the checklists.
Incorrect refund claims continue to be the most significant risk to the GST system. They may be the result of an honest mistake, misapplication of the law, deliberate non-compliance with the law or fraud. In 2010-11 we checked 56,000 refunds and prevented approximately $500 million in refunds being issued incorrectly.
We assisted taxpayers by providing online tools, publications, seminars and by visiting small businesses.
In GST litigation matters, we received favourable decisions in 74% of cases and partly favourable decisions in 13% of cases, while taxpayers were successful in 13% of cases. While these results were similar to 2009-10 the unfavourable decisions included several significant cases with adverse revenue consequences and we are carefully considering these decisions.
We are observing an increase in litigation that is seeking to test core elements of the GST legislation - supply and consideration as well as continued litigation related to special rules.
Focusing on fraud
During 2010-11 we also focused on GST-fraud. There were 28 GST-related fraud cases dealt with in the courts, resulting in 23 people being convicted with sentences imposed ranging from 10 months to seven years and six months imprisonment. We also provided 29 new GST-related briefs of evidence to the Commonwealth Director of Public Prosecutions, representing $21.1 million in estimated lost GST revenue.
Through prosecutions and penalties we are sending a strong messaged to anyone considering GST fraud or evasion; it is not worth the risk.
For more information on our GST activities, see the GST administration end-year performance report 2010-11, to be released in November 2011.