Speaking at the 14th International ATAX Conference on Tax Administration on 23 November, Chris Jordan said the ATO is focused on ensuring it has the right processes in place to respond to challenges in a productive manner.
“We cannot rely on audits alone to maintain the integrity of the tax system, so fundamental to all of this is how we use digital capability and data – to build systems that make it easy for taxpayers to get it right (and hard not to), and allow us to better analyse where someone needs a nudge in the right direction, or a firmer hand,” Mr Jordan said.
“…We know the key to an effective tax system is a high level of willing participation and where most taxpayers are honest and try to do the right thing. The majority of Australians do that now; and we must encourage that predominantly compliant attitude to continue by providing the right systems and support.”
Zooming in on large businesses, Mr Jordan said it has become more important than ever for the ATO to work in a “collaborative, open and constructive way”, rather than “auditing after the fact”.
“Under our Justified Trust program, we work one-on-one with the largest economic groups in Australia to assure that they have paid the right amount of tax. We continually monitor the ‘Top 100’ largest public and multinational businesses, and 80 per cent have achieved medium or high assurance,” Mr Jordan outlined.
“The Top 100 is the most intensive of all the programs, and organisations that have achieved this standard can be proud of the achievement. Achieving ‘Justified Trust’ means the ATO can take a less intensive monitoring approach, and it forms a strong foundation for future engagements. This is important at two levels. We assure compliance with those taxpayers who have the largest economic impact, and we provide the community with confidence that large businesses are paying the right amount of tax.”
Mr Jordan said the ATO takes a different approach with other markets.
“Our approach with the other markets is completely different. In markets where we have millions of taxpayers, we don’t have the time or the money to actively engage with each taxpayer. Technology and data do the heavy lifting and they do it better than we ever could before, directing our investment to the right places and having a significant effect on the bottom line,” he explained.
“We know that most people do the right thing – in fact, tax performance in the individuals and small business sectors is strong, with little or no intervention from us. Individuals tax performance is approximately 94 per cent, and small business income tax is around 87 per cent.
“Through our various strategies to address the tax gaps, we have developed a strong understanding of the levers that can improve tax performance. This informs our focus on early intervention and on helping taxpayers and their tax professionals get it right up-front, with the right guidance, systems and support.”
In conclusion, Mr Jordan noted that during tax time 2021, nearly 370,000 taxpayers were prompted to review their work-related expense deductions based on comparisons to individuals with similar jobs and expenditures. These prompts caused taxpayers to make adjustments estimated to have a revenue impact of approximately $37 million, he said.
“This is just the beginning of what data can do to help us manage the individuals and small business markets, and over the next decade we will need to go much further in how we make the most of the data we have available to us,” Mr Jordan said.
