As published on smh.com.au, Thursday 21 October, 2021.
Nearly $34 billion worth of tax was not paid in the year before the pandemic hit with small businesses and individuals responsible for the majority of the missing money.
The Australian Taxation Office estimates there was a 7.3 per cent gap between collected tax and what was expected to be brought in during 2018-19 or about $33.5 billion. This was up from $32 billion the year before.
The vast majority of the missing tax from what was expected was attributed to small businesses ($12.5 billion) and individuals ($8.4 billion). A further $2.6 billion was missing from large corporate groups.
It is not yet clear how this gap has changed during the pandemic, though the ATO was less aggressive in its compliance activities at the height of the crisis.
The tax office collected $11.5 billion in total revenue from 5.2 million compliance activities out of a target of $15 billion in 2020-21. In 2019-20 there were 3.9 million compliance activities with $13.7 billion in revenue raised while the year before there were 4.3 million, raising $15.3 billion.
In an address to the Tax Institute on Thursday, ATO Commissioner Chris Jordan said compliance work was paused last year amid the impact of the COVID-19 outbreak.
“We took a considered approach to turning it back on towards the end of last year, and have remained flexible. The last thing we want is to put added pressure on people who are experiencing financial distress,” Mr Jordan said.
The ATO is planning to contact 500 tax agents under its “shadow economy” program, which aims to approach tax professionals early if they are considered to be engaging in risky tax behaviour.
The tax office’s annual report says total revenue effects – an indicator that measures the impact of compliance activities – were below target for the first nine months of the 2020-2021 financial year due to the pandemic. Tax returns for 2020-21 are due on October 31.
“As resources were moved away from administering stimulus programs and back to our regular activities, along with some recovery of economic conditions, performance against the target improved in the final quarter,” the report says.
Each lodgment made by taxpayers and businesses was lower on average during the pandemic than in typical years and refunds were increased. While there were 3.8 million tax forms lodged in 2020-21, which was up by 800,000, the revenue was down $2 billion overall to $3.9 billion.
Mr Jordan further said the tax office will be looking more closely into the Pandora Papers, a trove of 12 million documents leaked to hundreds of journalists across the globe detailing hidden wealth and tax avoidance among some of the world’s richest people.
“You will have seen the recent reports on the Pandora Papers,” Mr Jordan said.
“We will analyse information that becomes available, compare it with data we already have and, where necessary, will investigate and take action against those who are involved in offshore tax evasion.”