29/05/2017 - 19:48

Criminal or work shy, tax evasion costing billions

29/05/2017 - 19:48

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The red tape facing some businesses is having consequences beyond merely increasing compliance costs, according to chair of the federal government’s Black Economy Taskforce Michael Andrews, and is a contributing factor in tax evasion far more significant than any similar activity undertaken by multinationals.

Treasurer Scott Morrison is looking to target the black economy to fill a budget black hole.

The red tape facing some businesses is having consequences beyond merely increasing compliance costs, according to chair of the federal government’s Black Economy Taskforce Michael Andrews, and is a contributing factor in tax evasion far more significant than any similar activity undertaken by multinationals.

The taskforce, which was created to combat businesses operating outside the tax system, will host a public consultation event in Perth today.

Speaking to Business News ahead of the event, Mr Andrews said moves to avoid regulations were having a flow-on effect on tax avoidance.

“Particularly, small businesses find (regulation) overwhelming,” he said.

“It’s easier to operate outside the system than come into the system.

“There's all sorts of licensing rules that are required, there’s occupational health and safety, there’s issues around employees.

“So at this stage, frankly a lot of people say it's just easier to run a cash business.”

Such people were often doing so not to avoid tax, Mr Andrews said, but rather to avoid paperwork.

In one part of Australia, there were 84 registrations required to open a restaurant, he said.

Mr Andrews said while the public focus was on avoidance by multinationals, the impact on revenue of the so-called black economy, where transactions were not disclosed, was likely to be much larger.

“I think the revenue leakage here (is) probably close to 10 times (more),” he said.

That would be up to $15 billion annually, Mr Andrews estimated.

The taskforce published its draft report earlier this month, with a range of recommendations to crack down on the problem.

He said encouraging compliance with a one-stop shop regulatory approach was one mechanism. Another was to create commercial consequences for non-compliance.

“If you’re a large Australian company, you should be responsible for all the people who supply you goods and services, to make sure they’re behaving ethically,” Mr Andrews said.

A move in that direction was in the budget, stopping organisations that had been associated with bribery, for example, participating in government tenders.

In Europe, bigger companies were moving to audit their supply chains, he said.

“A number of people have come forward and showed me organisations controlled by organised crime, (other organisations) which are blatantly phoenixing and not complying with their obligations and in many cases they are contracting with very large Australian companies and government,” Mr Andrews said.

Darker

The taskforce is just now seeking to dip into the more criminal aspects of the black economy.

Mr Andrews said criminal activities, such as drugs, money laundering and exploitative labour hire were becoming more frequent.

“We need to get much better criminal intelligence,” he said.

“Not all the agencies in government are well connected and talking to each other; we’ve got to be able to follow the cash flow far better than we are at the moment.

“I keep explaining to people, (the US government) got Al Capone for tax evasion, not for murder.”

Making moves in that area would mean creating better incentives for whistleblowers, as one example, he said.

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