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Errors and over-claiming for work related expenses and the Tax Gap (Part 2)

In case you missed it, Tax Commissioner Chris Jordan made a public address on the 5th of July 2017 in which he spoke about the ATO’s plans moving forward, especially concerning tax gaps. Let’s take a brief rundown of the situation as it stands:

  • The ATO, for the first time is going to publish estimates for corporate tax and income tax gaps for different segments. They were previously publishing estimates for GST based gaps.
  • Their first release of these numbers was for the corporate tax gap calculated based on 2014-15 data, which is approximately $2.5 billion (a tax gap is the difference between what the ATO has collected and what it should have collected, were everyone compliant with the existing laws.)
  • This $2.5 billion tax gap shows that the ATO has collected about 94% of the corporate tax they should be receiving, 91% voluntarily declared and 3% through compliance intervention. While this is around global best practice, the ATO will continue to closely watch the 1400 businesses in that segment.
  • Their current aim for corporate tax is to work with taxpayers to encourage voluntary compliance and move away from the necessity for increased intervention.
  • The ATO is now dedicating more resources to other markets they believe, from their initial findings to have higher tax gaps. Namely; small businesses, the black economy (the cash economy) and the individuals market.

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Errors and over-claiming for work related expenses and the Tax Gap (Part 1)

Commissioner Chris Jordan AO

Address to the National Press Club, Canberra

5 July 2017

The ATO has expressed concerns about the numbers of incorrect work-related expense claims and the tax gap. Below is the key points extracted from the address of Commissioner Chris Jordan AO in early July at the NPA.

The Tax Gap:

  • The ATO will also continue with administrative reforms under our Reinvention Program, such as: earlier engagement, greater transparency and cooperation with clients and partners prevention and early warning, rather than correction and ‘gotcha’ more sophisticated use of data for both service and compliance purposes increased digital service offerings and streamlined interactions.
  • Now, let me share with you ‘what next’; the next big challenges we are facing: Influencing community perceptions and attitudes about tax; and, minimising tax gaps.
  • I want instead, to support mindsets where people feel more positive about their total tax experience – satisfied with their interactions and confident that the ATO is taking action against those who are not paying what they should. Let me turn to that now – paying the right amount and minimising tax gaps.
  • The tax gap is approximately $2.5 billion.
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