SYDNEY 21 October 2021: Commissioner of Taxation, Chris Jordan AO, CTA, addressed delegates at The Tax Summit this morning, and during Q&A in the session, was asked to address the tax gap number released in the ATO’s Annual Report earlier this week.
These numbers showed an overall gap of $33.5 billion (7.3%), $2.6 billion (4.3%) of which was attributed to large corporate groups and $12.5 billion (12.7%) of which was attributed to small business.
The Commissioner said that the ATO, “…have invested a lot of effort, process and oversight on that large corporate market.”
“We would be very surprised if we didn’t know what was going on when they lodge their tax return, so we’re pretty confident. With our justified trust programs, companies at that large level have the money to invest, to work with us to get this justified trust level where we’re not going to be crawling all over them every year because we believe their processes and systems are right.”
“We are, internationally, one of the most, if not the most, comprehensive publisher of tax gaps. Our figures, actually, do come up well against other countries, and do tend to reflect the similar type of trend.”
On the small business tax gap, the Commissioner said the Black Economy Taskforce has been successful in seeking to educate businesses in areas where cash is still heavily in use about their tax obligations and how to fulfill them.
“We explain to people: if you go digital, if you have better records, you will know better. And frankly, it’s difficult for us to know where you stand tax-wise, because you’re not really in our system. You might be remitting something but not a lot, you might not even be in the system.”
“A lot of it is localised, in a way, but it does impact on businesses that do pay tax. So it’s unacceptable. There is no licence to not pay tax. …Everyone who makes profit, makes taxable income, needs to pay tax.”
“We have a good country, we are lucky with our services. But everyone’s got to contribute to that.”
The Tax Institute’s General Manager, Tax Policy and Advocacy, Scott Treatt, CTA, said, “Most tax practitioners and taxpayers are trying to do the right thing. We have a very high level of voluntary compliance in Australia, as the Commissioner mentioned.
The key to closing the tax gap and so ensuring our communities are properly funded is education and support for those who want to get it right but may not have a strong understanding of the system. That’s where tax agents come in as not only a helping hand at tax time, but an important part of a business set up throughout the year.”
Scott also pointed out that the tax gap for FBT was by far the largest by percentage (22.6%), but relatively small in dollar value ($1.1 billion).
“Those numbers point to a grossly inefficient tax and gives more weight to the argument that it should be replaced. A simplified tax system could go a long way in increasing compliance with tax obligations.”
The Commissioner’s full address can be found at the ATO’s media centre.