Plugging Australia's Tax Gap: Will Third Parties Stop the Great Revenue Leak?

The Australian government could boost its coffers by many billions of dollars and improve compliance by increasing third-party reporting on taxpayers' incomes and withholding tax requirements. International studies show that relying on taxpayers' honesty and co-operation typically results in a shortfall, according to Richard Highfield, senior adviser with the OECD's Centre for Tax Policy and Administration. He estimates increasing third-party reporting on business-related income in particular – including business-to-business and business-to-consumer sales, share transactions and property rentals – would significantly stem "revenue leakage."Australia has "lots of room" for improvement, agrees the US national taxpayer advocate, Nina Olson, but experience shows third-party reporting also can be counterproductive, she warns.