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  • We measure community perceptions and the level of willing participation

    Like most administrations, we rely on a range of performance indicators to measure the health of the tax system. While direct revenue collections tell an important part of the story, we are also interested in how our interventions affect compliance behaviour over the longer-term.

    Collectively, our measures offer rich insights that guide us in determining priority risks and opportunities as well as how best to invest our resources.

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    Community perceptions of fairness

    We regularly conduct surveys and measure ourselves against fairness targets to ensure our interactions with people foster willing participation in the tax system. The findings for individual taxpayers (including those who are in business) for 2016–17 show that:

    • 68% think we are fair and professional in administering the tax and superannuation systems
    • 56% of taxpayers involved in a dispute with us agreed the dispute process was fair
    • 71% of those who were audited thought the audit process was fair.

    While these figures vary from year-to-year, our surveys generally show that perceptions of the ATO are much more likely to be favourable than unfavourable. They also indicate that recent contact with us has a positive influence on wider perceptions of us. Nevertheless, we know there is always room to improve. We are constantly working to build community trust and confidence in our administration, across all our service areas.

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    Willing participation

    In line with the Organisation for Economic Co-operation and Development (OECD) best practice guidance such as Measures of Tax Compliance Outcomes – A practical guideExternal Link, we use estimates of tax gaps, audit yield and estimates of wider revenue effects to evaluate the impact of our prevention and correction strategies on the level of willing participation for individuals over time.

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    Total revenue effects

    Total revenue effects are a measure of the revenue we collect as a result of our compliance interventions including audits, other direct interventions and improvements to the design of the tax administration process. Here, we separate these collections into audit yield and wider revenue effects.

    Audit yield is the additional tax liabilities identified and collected through audit activities including interest and penalties.

    Wider revenue effects are an estimate of revenue collected as a result of ongoing behavioural change following an ATO action. It measures the additional tax revenue that results from all our client engagement activities that can be measured and are not already captured by audit yield. This includes revenue from our preventative and corrective activities designed to assist and encourage clients to pay the right amount of tax in future. It also measures changes in compliance from a wider taxpayer population that has not been subject to a direct intervention.

    A key principle we use when measuring wider revenue effects is ensuring there is a clear causal connection between our activity and the change in taxpayer behaviour.

    We expect the amount we attribute to wider revenue effects will grow as our strategies to foster willing participation become increasingly effective.

    Individuals total revenue effects (income tax)

     

    2012–13

    2013–14

    2014–15

    2015–16

    2016–17(a)

    Audit yield (cash) ($m)

    763

    968

    1,160

    904

    718

    Wider revenue ($m)(b)(c)

    N/A

    922

    985

    976

    1,018

    Total revenue ($m)

    763

    1,890

    2,145

    1,880

    1,736

    (a) For 2016–17, we changed the way we define the individuals population, excluding those individuals in business. Amounts for this year are not comparable to preceding years.(b) Wider revenue effects were not measured prior to 2013–14.(c) Wider revenue effects shown here include some effects from individuals in business.

    Tax assured

    Tax assured is the proportion of tax paid that we are confident is correct.

    For individuals not in business, third-party data matching provides us with a high level of confidence that income shown at particular return items is correct. However, we do not have the same ability to assure information relating to deductions and some offsets.

    In the 2014–15 and 2015–16 years we estimate around 74% of tax paid by individuals not in business can be assured as correct.

    As the quantity and quality of data we collect improves, we expect the amount of revenue we deem to be ‘assured’ will increase.

    Revenue measures framework

    Our revenue measures work in combination to provide a holistic view of the health of the income tax system. The relationship between these measures is illustrated in the diagram below.

    Income tax system measures

    This diagram shows the relationship between income tax system measures including the theoretical tax liability against tax voluntarily reported and paid, tax assured, wider revenue effects, adjustments, gross gap and net gap.

    Note: This graph is illustrative only and is not to scale. Adjustments include compliance outcomes and voluntary disclosures relating to primary tax on an accrual (form year) basis. Audit yield is not represented as it includes penalties and interest and is measured on a cash basis.

    Last modified: 12 Jul 2018QC 56224