A story about the ATO and a so-called tax gap caught my eye this morning:
The Australian Taxation Office is confident it can squeeze more out of corporate Australia, narrowing a gap of about 6 per cent — or $2.5 billion — between the amount of tax the big end of town should pay and the amount it actually contributes.
In a study of the corporate tax gap released today, the ATO estimates underpayments between the 2008-09 financial year and the 2014-15 financial year total $17.8bn, for an average of 5.8 per cent.
That is itself not interesting – the ATO is a bureaucracy and has all the perverse incentives that all bureaucracies face. So they have to promise more and more and more to maintain or grow their own budget.
Rather I found this very interesting:
He said gap measuring forced the ATO to ask itself: “How much are we not collecting and why?”
This was different to the traditional approach of asking how efficient the ATO was at collecting money — “how many audit results you got for per dollar you spent”.
“An analogy is if you had WADA (the World Anti-Doping Agency) at the Olympics being rewarded on how many drug cheats they catch, not how clean the Olympics are,” Mr Hirschhorn said. “They’re slightly but importantly different questions. In fact, what people, whether spectators or clean participants, are interested in is a clean Olympics, not how many drug cheats are caught.
Hmmmmm – the ATO should behave like WADA. We here at the Cat have closely observed WADA in action over the past few years. When you can’t get your way in Australian courts, you change the rules, you reverse the onus of proof, you enforce self-incrimination, you engage in double jeopardy, you prosecute people in a foreign language. Do we really want the Australian tax system run like the Salem witch trials? You’re not guilty of tax evasion if you can recite the Lord’s prayer, backwards, and in Latin.
Reading the article is quite astonishing – the ATO has one job; collect the tax revenue that has been authorised for collection by the Parliament. Maximising tax revenue collected is not their job, and cannot be their job.
He said the gap estimate was “based on hard, granular data”.
If that was the case, it should have been collected already.