Understanding the tax gap allows us to understand the overall performance of the tax system. Viewing the performance of the tax system with the economic environment at the time means we can better understand all the factors that may have influenced tax performance in 2022–22.
On an accrual basis, company tax reported and paid (including amendments) grew by around 20% in 2021–22 relative to 2020–21 to around $130 billion. Stronger growth rates were driven by large corporates, companies owned by high-wealth networks, while medium and small businesses reported slower growth.
On aggregate, personal income tax reported and paid (including amendments) also grew by 12% for 2021–22, underpinned by uneven growth across individuals who are in business and those whose primary income source is salary and wages. Individuals who owned or had connections to businesses reported on average 24% more personal income tax voluntarily in 2021–22 compared to the previous year. Individuals who were employees reported an increase of 6% over the same period.
Meanwhile, GST reported and paid (including amendments) grew by 8% in 2021–22, lower than that of corporate income tax.
The relatively strong growth in tax paid relative to growth in the estimated theoretical tax liabilities saw improvements in 6 out of the 15 gap estimates that constitute the whole-of-system gap estimate. For the system, we estimate that we will collect $545.8 billion in overall tax revenue for 2021–22 and a tax gap estimate of $44.5 billion. This gives us an overall estimate of the net tax gap of 7.5%.
This indicates that for 2021–22, we estimate that we will collect 92% of the tax that we estimate we should collect,, with 90.1% reported voluntarily (including the results of sustained improvements in compliance from prior year activities) and 2.4% was the result of compliance amendments and voluntary disclosures (see Figure 1).
Figure 1: Tax performance for published tax gaps in 2021–22
Across our tax gap program, we estimate that for 11 out of the 15 segments, we received more than 90% of the tax that is expected to be collected in 2021–22.
Our compliance action continues to be important in ensuring high levels of tax performance. We can see this when we compare the gross tax performance (voluntary performance) to the net tax performance (after compliance intervention). For example, looking at the large corporate groups tax gap, the performance in this market improves from 93.2% before our engagement to 95.9% after.
For our transaction-based taxes, compliance action has the biggest impact for tobacco duty, where the performance in 2021-22 improves from 71% before the action of illicit tobacco taskforce, to 87% after the actions of the joint Australian Border Force and ATO Taskforce. Find out more about the drivers for each tax gap and what we are doing about it.
Figures 2 and 3 show a breakdown of the tax performance ratios for the 15 tax gaps. It shows the tax performance before any ATO-initiated action (gross performance) and the result after ATO-initiated action (net performance). Figure 2 includes both indirect taxes and excises. Figure 3 includes all income-based taxes.
Figure 2: Tax performance for transaction-based tax gaps in 2021–22
Figure 3: Tax performance for income-based tax gaps in 2021–22
Since we first started estimating the total tax gap (2015–16), we have observed an overall decline in the net tax gap, falling from 8.3% in 2015–16 to 7.5% in the latest year (2021–22). Between the years, we have observed some variation, including 2018–19, where the estimate increased to 8.1%.
The trend in the gross tax gap has historically followed the net tax gap estimate. Since 2019–20, the difference between the two has been increasing. There are two major reasons for this. First is the increase in illicit tobacco attempted to being smuggled into the country that is seized at the border by Australian Border Force. The second relates to BAS refund fraud which saw elevated levels of fraudulent claims for expenses claimed on a BAS statement, which include GST, fuel tax credit and luxury car tax.
Figure 4: Tax gap trend from 2016–17 to 2021–22