For the 2019–20 financial year, we estimate a net luxury car tax (LCT) gap of 3.3% or $22 million. In other words, more than 96% of the total theoretical tax was paid.
The net LCT gap estimate has been as high as 12.2% in 2015–16. It has trended down recently as we initiated a refund integrity program to address fraudulent and overclaimed refunds and improve the correct reporting of LCT refunds by claimants.
The program resulted in a reduction in refunds claimed by LCT entities since 2017–18 and contributed to an increase in the share of voluntarily reported LCT. This has driven an improvement in both net and gross tax performance.
Gross performance has improved to almost 96%, compared to the average of around 90% in the previous 5 years. Also, a reduction in the total theoretical tax liability driven by shifts in the type and prices of luxury cars sold during the onset of COVID has indirectly contributed to a lower gap estimate for 2019–20.
Table 1: Luxury car tax gap, 2014–15 to 2019–20
Element |
2014–15 |
2015–16 |
2016–17 |
2017–18 |
2018–19 |
2019–20 |
|---|---|---|---|---|---|---|
Population |
2,069 |
2,120 |
2,126 |
2,108 |
2,185 |
2,399 |
Gross gap ($m) |
46 |
91 |
59 |
86 |
70 |
28 |
Amendments ($m) |
7.6 |
5.4 |
8.2 |
21.0 |
12.4 |
6.5 |
Net gap ($m) |
39 |
85 |
51 |
65 |
57 |
22 |
Tax paid ($m) |
523 |
610 |
676 |
691 |
667 |
637 |
Theoretical liability ($m) |
562 |
695 |
727 |
756 |
724 |
658 |
Gross gap (%) |
8.3 |
13.0 |
8.1 |
11.4 |
9.6 |
4.3 |
Net gap (%) |
6.9 |
12.2 |
7.0 |
8.6 |
7.9 |
3.3 |
Figure 1 shows the trend in the gross and net tax gap estimates over the same period.
Figure 1: Gross and net LCT gap (percentage), 2014–15 to 2019–20
We see some volatility in this gap from year-to-year. Our analysis suggests the size of the gap is sensitive to movements in macroeconomic factors, such as the exchange rate given that most vehicles subject to LCT are imported.