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Fewer but larger taxpayers give better tax gap result

Publication date: 13 Dec 18 | Source: THE TAX INSTITUTE

SYDNEY, 13 December 2018: The ATO has today released important information regarding Australia’s corporate tax system. 

The tax gaps for income tax paid by large corporate groups and the Petroleum Resource Rent Tax (PRRT) were revealed. These gaps measure the estimate of the difference between the tax which would have been collected if all taxpayers were fully compliant and the tax actually collected. 

For large corporates, the net tax gap for 2015-16 is 4.4% representing an estimate of $1.833 billion in revenue not collected. 

For PRRT, the net tax gap for 2015-16 is 2% representing an estimate of $18 million in revenue not collected. 

The Tax Institute’s Senior Tax Counsel, Professor Robert Deutsch comments that “these figures are the lowest they have been since measurements first began – both in percentage and dollar terms.” 

The explanation for the improved compliance in the large corporate sector must be at least partly attributable to the continuing focus on international tax avoidance by the Federal Government with the relatively recent introduction of a suite of measures including the Multinational Anti-Avoidance Laws (MAAL) and the Diverted Profits Tax (DPT). The focus by the ATO on a number of high profile transfer pricing audits and cases has also clearly had an impact. 

The PRRT has not had nearly the same level of public scrutiny, but with only a handful of taxpayers to deal with, (14 in 2016-17 and only 9 in 2015-16) and in the order of $1 billion in revenue, close monitoring of the activities of so few is possible. That close monitoring would go some way to explain the low level of the net tax gap for PRRT. 

“These net tax gaps and the previously released individual net tax gap reveal a great deal about tax behaviour”, said Professor Deutsch. 

“Perhaps obviously (but nonetheless significantly), tax law compliance is much easier when large amounts of revenue are drawn from a few, (PRRT and company tax paid by large corporates) than when a multitude of small amounts are drawn from many.” (individual income tax), added Professor Deutsch. 


For more information, please contact: Stephanie Conway, Media Relations: 02 8223 0011. 

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