The Australian Taxation Office (ATO) estimates that the corporate tax gap for large businesses is around six percent, according to Commissioner Chris Jordan.
In August, the ATO will formally release the findings of its investigation into the corporate tax gap. Later in the year, it will report on the personal income tax gap.
However, in advance of the formal release, Jordan told the National Press Club that, based on 2014-15 data, the "large market" corporate tax gap is approximately AUD2.5bn (USD1.9bn). This is equivalent to about six percent of the collections for that market, he explained.
Jordan said: "The gap tells us that we are getting around 94 percent of the corporate tax we should from this market – approximately 91 percent coming in voluntarily and three percent through compliance interventions. From all indications, 94 percent is around global best practice, and many countries aspire to this level of compliance."
Jordan added that the ATO is now better placed to "ensure that what is earned here is taxed here," following the introduction of the Multinational Anti-Avoidance Law, the Diverted Profits Tax, Anti-Hybrid Rules, and new exchange of information systems. He said that in the last year the ATO raised AUD4bn of additional liabilities against businesses and multinationals, with AUD2.9bn of this from seven large groups in the e-commerce and energy and resources sectors.
According to Jordan, the ATO's preliminary findings on the gaps for small business indicate that is likely to be a wider gap in this sector than in the "large market." He said the ATO is targeting small businesses that are failing to report all their income or none at all.
Turning to individual income tax, Jordan said that the ATO's research has so far shown the main risks of non-compliance center around deductions. He noted: "The results of our random audits and risk-based audits are showing many errors and overclaiming for work-related expenses – from legitimate mistakes and carelessness through to recklessness and fraud."
"While each of the individual amounts over-claimed is relatively small, the sum and overall revenue impact for the population involved could be significant – in the vicinity of, or even higher than, the large market tax gap of AUD2.5bn – and that's just for this category of deductions, work-related expenses," Jordan added.