Miscellaneous 2017

Estimating aggregate tax compliance costs: a new approach using a state space model

Source: Australian Tax Forum Journal Article

Published Date: 1 Apr 2017


This article aims to develop a general statistical method for estimating tax compliance costs in Australia on an annual basis. The proposed approach represents an attractive alternative to the traditional, large-scale survey method which is known to be expensive and time-consuming to conduct. A state space mode is applied to a series of tax administrative costs, approximated by annual expenditures incurred by the Australian Taxation Office. This produces estimated annual growth rates of Australian's tax compliance costs. Combining the growth rates obtained from the state space model with a comprehensive survey-based estimate of tax compliance costs in a particular year, an annual series of tax compliance costs can then be generated. Note that the proposed method has general applicability and the use of Australian data is a mere illustration.

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Miscellaneous 2017

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