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Measuring effectiveness in managing a tax system is not an easy task. You need to understand the level of compliance with tax obligations in a community as a whole. This is an area of research that many tax administrations across the world are engaged in.
The ATO developed a set of indicators called the “Participation in the System Indicators” which show the level of compliance with tax obligations and that level of compliance is the measure of effectiveness of a revenue authority. These indicators use a combination of taxation, economic and demographic data to measure participation levels in relation to the four pillars of compliance of the Organisation for Economic Cooperation and Development (OECD).
The OECD considers that the following obligations are the four pillars of compliance that are likely to exist for almost all taxpayers:

  • Correctly registering in the system;
  • Lodging tax information on time;
  • Reporting complete and accurate information;
  • Paying tax obligations on time. The indicators stand alone with the behaviour being measured in isolation for each pillar.

Further work is continuing on indicators which examine taxpayer groupings across pillars. If you lodge your tax return online on time but do not correctly report income or pay tax liabilities, then it will be factored into the measurements.

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