Morrison government told to simplify Australia's tax system by 2022

"Fairness would be maintained by enabling individuals to claim above the set amount by providing full substantiation through a tax return process," the report said.

Paper-based returns would be maintained for the foreseeable future, and the rights and obligations of the government and taxpayers would be outlined in a new framework, designed to promote fairness and confidence.

In a move likely to be welcomed by accountants and tax agents, the report recommends the Tax Office develop a new service level agreement that includes payments to end users for poor delivery outcomes.

"The committee found that while the ATO's 'reinvention' as a modern tax administration service is well under way, our complex tax system is throwing up some hurdles to full automation – as advanced in Sweden, the United Kingdom and closer to home New Zealand, where most taxpayers need only approve a prefilled form," committee chairman and Liberal MP Jason Falinski said.

Released in 2010, the Henry report made 138 specific recommendations in areas including personal income tax, land tax and corporate tax.

The controversial and ultimately watered down mining super profits tax was the only major recommendation implemented.

After the defeat of its big business company tax cut plan under Malcolm Turnbull, the government is expected to fast track company tax cuts for small and medium business in a $3.6 billion move, set to be complete by as early as 2021-22.

Monday's report also recommended more immediate tax reform to close loopholes, and meet new challenges developing from the gig economy.

It called digitisation of tax services "the silver bullet" to address new and traditional problems of tax administration around the world.

The Tax Office said in July that some $8.7 billion in tax revenue had gone uncollected, about 6.4 per cent of revenue from the country's 9.6 million taxpayers.

As a result of the "tax gap" analysis, the ATO will weaponise new government funding to recover $1 billion from taxpayers and tax agents who are deliberately and aggressively minimising their tax bills.

Last week prominent economist Ross Garnaut called on the government to appoint an expert or independent committee to prepare a report on pathways to fundamental corporate tax reform.

Shadow assistant treasurer Andrew Leigh said the ATO had to deal with many complex challenges, "but it will always be harder to do this when the Coalition has cut 4000 Tax Office jobs since coming to office."