Collection of state taxes

• OSR has steadily collected more tax over time. The amount of tax raised in the last 4 years increased by $1.3 billion. Reasons for this increase include additional work OSR did to reduce backlogs in its assessments; changes to legislation, tax rates and thresholds; and changes in economic conditions.
• OSR is doing well in collecting taxes when compared with government tax estimates, which take into account changes in legislation and economic conditions. In 2011-12, the total tax raised was almost $6 billion compared with a midyear tax estimate of $5.8 billion. In 2015-16, the $7.3 billion raised was about $59 million more than the estimate.
• Although OSR has raised more tax in total than estimated, there were major differences in the estimates for 2 types of tax.OSR does not know if incorrect estimates, a tax gap, or both, caused the differences. Until OSR identifies the reasons for the differences, it is not in a position to address potential tax gaps in its collection processes.
• Landholder duty^[1] showed major differences in 4 of the past 5 years between the actual amounts raised and the respective midyear estimates. Transfer duty showed major differences in 3 of the past 5 years. The differences for landholder duty ranged from -22.3% to 358.9% and for transfer duty from -9.2% to 11.3%.
• OSR is aware of the risk that tax obligations can be underreported and that this can result in a tax gap. However, with the exception of vehicle licence duty, it does not estimate what the tax gap costs the state. Tax gap estimates provide a baseline for monitoring the loss of revenue and the impact of tax office actions to reduce the loss.
• In 2013, OSR estimated the vehicle licence duty tax gap and has been working on ways to collect some of it. In 2015 and 2016, it calculated new estimates but did not use results from its ongoing work to inform the estimates. An estimate based on actual experience would provide a stronger basis for measuring OSR performance in this area.
• There is a gap in OSR’s public reporting of timely tax collection. OSR publicly reports on the percentage of tax assessments paid on time. In 2015-16, the figure was 90%. However, it does not say how much tax in dollars this represented or how soon it collected tax not paid on time. An internal measure OSR uses is tax debt less than 1% of tax collected. OSR performs well against this measure but by not reporting it publicly, it does not demonstrate that it gives adequate priority to collecting overdue taxes.

Read more – OSR is collecting more tax over time but there is more tax that could be collected

Management of collection costs

• OSR does not use unit cost information to monitor if it carries out its activities at a higher or lower cost over time. This information would show which parts of its operations could become more efficient. The most important examples of what OSR does to measure its efficiency are:
  • Over the 5 years since 2011-12, OSR’s efficiency key performance indicator – Cost to raise $100 – has risen by 12.9%. An upward trend over time can indicate declining efficiency. While increases can be due to external factors outside OSR’s control, such as public sector pay increases, they can also be offset by new systems, processes and continuous improvements. Whether the upward trend indicates declining efficiency can only be determined by regular monitoring of the costs of specific activities or services, which OSR did not do.
  • OSR used 200 measures to track its core activities by volume. The results show volumes have increased over time. However, as OSR has received extra funding to do more over time, volume increases are not proof of increased efficiency. Unit cost information helps show if volume increases are due to greater efficiency or funding changes.

• OSR has programs underway to improve its operational efficiency. These include programs to make it easier for taxpayers to pay their tax electronically. Results to date are promising but it is too early to assess the impact.

Read more – OSR could do more to show it operates efficiently

[1] Landholder duty is payable when someone buys a major interest in a company or unit trust that owns land worth at least $2 million.