Report 30

Measuring Tax Collection Performance

Response from the Office of State Revenue

The Office of State Revenue accepts the recommendations in the report and considers them achievable within the timeframes specified. State Revenue appreciates recognition of its effort to improve operational efficiency and service delivery by re-designing and simplifying its tax operations, including through programs that are making it easier for taxpayers to make electronic payments.

In broad terms, the recommendations and timeframes are consistent with the timetable of work already underway as part of State Revenue’s 2016-17 Business Plan and the Department of Finance’s 2015-2018 Strategic Directions. There are several factors likely to affect how State Revenue implements its findings once the analysis required by the recommendations has been completed.

The report places reliance on the use of tax gap estimates to indicate lost Government revenue and as a baseline measure of how State Revenue’s programs affect taxpayer behaviour. Commonwealth and international research generally accepts that tax gap estimates, particularly for direct taxes, are not reliable indicators of a revenue administrator’s performance due to the level of uncertainty associated with their measurement. State Revenue considers that tax gap analysis should only be published when the methodology and data is sufficiently robust to support the estimate. When this occurs, tax gap analysis should also be combined with other measures of effectiveness to give a more reliable indicator of performance. State Revenue is collaborating with its interjurisdictional counterparts to investigate a reliable methodology for estimating tax gaps on major State tax bases.

The report uses comparisons between revenue raised by State Revenue and the Government’s mid-year revenue estimates as an indicator of revenue office performance. The Quarterly Financial Results Report published on the Department of Treasury website already includes comparisons of revenue raised with Budget estimates. Including an additional State Revenue performance target that incentivises the achievement of collections against revenue forecasts has the potential to undermine the fair and equitable administration of the revenue laws and potentially compromise the Commissioner of State Revenue’s statutory independence.

State Revenue intends to publish more information on its website about its tax collection efficiency and effectiveness. In the longer term, the Department aims to complement this information with an improved suite of audited performance indicators in its Annual Report.

Page last updated: December 22, 2016

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