Contributed by Allan Coe, Senior Content Specialist, Wolters Kluwer CCH
The Black Economy Taskforce is currently holding a series of roundtable discussions with industry as well as town hall meetings with interested members of the public. These meetings are taking place in capital and regional centres and will continue during June.
The Black Economy Taskforce, chaired by Michael Andrew (Chair of the Board of Taxation), is a joint partnership between Australian Government agencies and the private sector. It commenced in January 2017 and published an interim report in March 2017.
Of the 35 recommendations in the interim report four recommendations were immediately accepted and incorporated into the 2017 Federal Budget.
These recommendations were:
- access to Government procurement opportunities should be limited to firms which have a good tax record
- expansion of the taxable payment reporting system to the cleaning and courier sectors
- ban on sale suppression software, and
- funding for ATO activities.
As chair, Michael Andrew is personally conducting these meetings and town hall events. The central theme is the need to ensure a level playing field and to prevent an unfair commercial environment. Michael focused on a number of recommendations that will assist in delivering this outcome:
- non-deductibility of cash payments
- further expansion of the taxable payment reporting system
- lowering the GST threshold
- whole of government data and a multi-agency view
- lowering the cost of non-cash payment methods
- multi-agency approach to whistleblowers
- use of biometric data, and
- multinationals publishing tax data.
Cash payments and corresponding non-payment of tax and other obligations is a significant topic of conversation when it comes to creating a level playing field. Reform options include a limit on cash payments (possibly $10,000), non-deductibility of cash payments for tax purposes, and non-inclusion of cash payments in cost bases for CGT and depreciation.
A proposal from the floor was that a partial tax deduction be given for taxpayers if they have a receipt for private expenditure on work that has been undertaken, hence impacting the practice of businesses charging a lower price for cash (without receipt) jobs.
Further expansion of the taxable payments reporting system to other industries is a recommendation of the taskforce which has already been partially implemented in the May Federal Budget. The taskforce recognises that a ‘one size fits all’ approach is not appropriate when countering the black economy, and expansion of the system to high-risk industries will improve compliance. While the interim report identified a number of industries, Michael focused on labour hire firms and IT contractors.
Lowering the GST threshold will expand the tax base by bringing individuals with a low turnover within the GST system. This may address the uneven playing field that currently exists as some small operators currently do not have a GST obligation. However, the view from the floor was this cannot be seen as a black economy activity as these individuals are operating within the rules as they currently exist.
Michael stated that there are currently 259 government databases with significant limitations on data sharing. A recommendation of the taskforce is a whole of government view of data, expanding across welfare, policy and tax.
The cost of non-cash payments, including interchange fees, is a barrier in businesses moving from cash to non-cash. The taskforce recognises the work of the finance industry and RBA in increasing access to, and reducing the cost of, non-cash payment methods. Michael discussed the new platform payment (NPP) and how costs will come down over time.
Various state and federal agencies have whistleblower programs. While the taskforce is supportive of the various programs, Michael was critical of the quality and consistency. The taskforce recommends changes, either in relation to individual programs or the establishment of a multi-agency approach.
Biometric data is used extensively internationally and domestically for security and border protection objectives. The taskforce is considering whether biometric data can be utlised to combat the black economy, noting the trade-off with privacy considerations.
Although not addressed in the interim report, Michael discussed a proposal for multinationals to have a mandatory requirement to publish their tax information. This will enable transparency which is one of the guiding principles of the taskforce.
Overarching the individual recommendations, Michael stressed the need to address social norms and for a cultural change to occur. Comparisons were made to society’s changing view of drink driving, and a need for black economy activities such as a cash discount to be socially unacceptable.
Submissions are open to the taskforce until 31 July 2017 which is due to publish a final report in October 2017. It would be expected that a number of the final recommendations will be adopted as part of the MYEFO (mid-year economic and fiscal outlook) in December 2017.